Debt Collection December 2020 Final Rule (Regulation F)

BILLING CODE: 4810-AM-P

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1006

[Docket No. CFPB-2019-0022]

RIN 3170-AA41

Debt Collection Practices (Regulation F)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is issuing this final rule

to revise Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA). The

final rule governs certain activities by debt collectors, as that term is defined in the FDCPA.

Among other things, the final rule clarifies the information that a debt collector must provide to a

consumer at the outset of debt collection communications, prohibits debt collectors from

bringing or threatening to bring a legal action against a consumer to collect a time-barred debt,

and requires debt collectors to take certain actions before furnishing information about a

consumer’s debt to a consumer reporting agency.

DATES: This rule is effective on November 30, 2021.

FOR FURTHER INFORMATION CONTACT: Joel Singerman, Counsel, or Dania Ayoubi,

Joseph Baressi, Seth Caffrey, Brandy Hood, David Jacobs, Courtney Jean, Adam Mayle, Kristin

McPartland, Michael Silver, Senior Counsels, Office of Regulations, at 202–435–7700. If you

require this document in an alternative electronic format, please contact

CFPB_Accessibility@cfpb.gov.

SUPPLEMENTARY INFORMATION:

I. Summary of the Final Rule

The Bureau is finalizing amendments to Regulation F, 12 CFR part 1006, which

implements the FDCPA.

The amendments prescribe Federal rules governing the activities of

debt collectors, as that term is defined in the FDCPA (debt collectors or FDCPA debt collectors).

The final rule clarifies the information that a debt collector must provide to a consumer at the

outset of debt collection communications and provides a model validation notice containing such

information. The final rule also addresses consumer protection concerns related to passive

collections (i.e., the practice of furnishing information about a debt to a consumer reporting

agency before communicating with the consumer about the debt) and the collection of debt that

is beyond the statute of limitations (i.e., time-barred debt). On November 30, 2020, the Bureau

published a final rule in the Federal Register that focused on debt collection communications

and related practices by debt collectors (November 2020 Final Rule). The November 2020 Final

Rule reserved certain sections of Regulation F in anticipation of this final rule.

As discussed in the November 2020 Final Rule, in 1977, Congress passed the FDCPA to

eliminate abusive debt collection practices by debt collectors, to ensure that those debt collectors

who refrain from using abusive debt collection practices are not competitively disadvantaged,

and to promote consistent State action to protect consumers against debt collection abuses.

The

statute was a response to “abundant evidence of the use of abusive, deceptive, and unfair debt

collection practices by many debt collectors.”

According to Congress, these practices

15 U.S.C. 1692 et seq.

15 U.S.C. 1692(e).

15 U.S.C. 1692(a).

“contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and

to invasions of individual privacy.”

The FDCPA established specific consumer protections, enabling consumers to establish

controls on when and how debt collectors contact them, establishing privacy protections

surrounding the collection of debts, and protecting consumers from certain collection practices.

The FDCPA also established broad consumer protections, prohibiting harassment or abuse, false

or misleading representations, and unfair practices. In the Dodd-Frank Wall Street Reform and

Consumer Protection Act (Dodd-Frank Act), Congress provided the Bureau with authority under

the FDCPA to prescribe substantive rules with respect to the collection of debts by debt

collectors. The Bureau issues this final rule, like the November 2020 Final Rule, to implement

and interpret the FDCPA.

A. Coverage and Organization of the Final Rule

The final rule is based primarily on the Bureau’s authority to issue rules to implement the

FDCPA and, consequently, covers debt collectors, as that term is defined in the FDCPA.

As revised in the November 2020 Final Rule, Regulation F contains four subparts.

Subpart A contains generally applicable provisions, such as definitions that apply throughout the

regulation. Subpart B contains rules for FDCPA debt collectors. Subpart C is reserved for any

future debt collection rulemakings. Subpart D contains certain miscellaneous provisions. This

final rule adds additional provisions in subparts A, B, and D.

B. Scope of the Final Rule

FDCPA section 809(a) requires that a debt collector send a written notice containing

certain information about the debt and actions the consumer may take in response (the validation

Id.

notice) to a consumer within five days of the initial communication, unless such validation

information was provided in the initial communication or the consumer has paid the debt.

The

final rule clarifies the information about the debt and the consumer’s rights with respect to the

debt that a debt collector must provide to a consumer at the outset of debt collection

communications, including (if applicable) on a validation notice. The final rule also requires a

debt collector to provide prompts that a consumer can use to dispute the debt, request

information about the original creditor, or take certain other actions. The final rule provides a

safe harbor for compliance with these disclosure requirements for debt collectors who use the

model validation notice or certain variations of the notice.

The final rule also prohibits a debt collector from suing or threatening to sue a consumer

to collect time-barred debt. In addition, the final rule prohibits a debt collector from furnishing

information about a debt to a consumer reporting agency before engaging in specific outreach to

the consumer about the debt. The final rule also addresses certain other disclosure-focused

provisions, such as clarifying how a debt collector may respond to a consumer’s request for

original-creditor information if the original creditor is the same as the current creditor.

Additionally, the final rule interprets the definition of consumer under the FDCPA to include

deceased natural persons and, relatedly, provides that, if a debt collector knows or should know

that the a consumer is deceased, and the debt collector has not previously provided the validation

information to the deceased consumer, the debt collector must provide that information to a

person who is authorized to act on behalf of the deceased consumer’s estate.

15 U.S.C. 1692g(a).

II. Background

A. Debt Collection Market Background

A consumer debt is commonly understood to be a consumer’s obligation to pay money to

another person or entity. Sometimes a debt arises out of a closed-end loan. Other times, a debt

arises from a consumer’s use of an open-end line of credit, commonly a credit card. And in other

cases, a debt arises from a consumer’s purchase of goods or services with payment due

thereafter. Often there is an agreed-upon payment schedule or date by which the consumer must

repay the debt.

For a variety of reasons, consumers sometimes are unable or unwilling to make payments

when they are due. Collection efforts may directly recover some or all of the overdue amounts

owed to debt owners and thereby may indirectly help to keep consumer credit available and more

affordable to consumers.

Collection activities also can lead to repayment plans or debt

restructuring that may provide consumers with additional time to make payments or resolve their

debts on more manageable terms.

The November 2020 Final Rule provides an extensive overview of the debt collection

market (including the roles of creditors, third-party debt collectors, debt buyers, and a variety of

service providers in the market), methods of debt collection, and consumer protection concerns

in debt collection.

Below the Bureau summarizes information regarding debt collection

methods and consumer protection concerns specifically related to the topics addressed in this

final rule.

See Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2013, at 9 (Ma r. 20,

2013), https://www.consumerfinance.gov/data-research/research-reports/annual-report-on-the-fair-debt-collection-

practices-act/ (2013 FDCPA Annual Report).

See id.

See 85 FR 76734, 76735-37 (Nov. 30, 2020).

B. Debt Collection Methods

If a consumer’s payment obligations remain unmet, a creditor may send the account to a

third-party debt collector to recover on the debt in the third-party debt collector’s name. A

creditor typically stops communicating with a consumer once responsibility for an account has

moved to a third-party debt collector. Active debt collection efforts typically begin with the debt

collector attempting to locate the consumer, usually by identifying a valid telephone number or

mailing address, so that the debt collector can establish contact with the consumer. Once a debt

collector has obtained contact information for a consumer, the debt collector typically will seek

to communicate with the consumer to obtain payment on some or all of the debt.

As already noted, FDCPA section 809(a) generally requires a debt collector to provide

certain information to a consumer either at the time that, or shortly after, the debt collector first

communicates with the consumer in connection with the collection of a debt. The required

information includes: (1) certain details about the debt, such as the amount of the debt and the

name of the creditor to whom the debt is owed; and (2) a description of consumer protections,

such as the consumer’s rights to dispute the debt and to request information about the original

creditor. A debt collector may send a validation notice containing the required information as

the initial communication to the consumer or send the required information in a validation notice

within five days after the initial communication. Currently, validation notices include little or no

information about the debt beyond the information specifically listed in FDCPA section 809(a).

This information may not be sufficient for the consumer to recognize the debt, particularly if, for

example, the amount owed has changed over time due to interest, fees, payment, or credits, or if

the debt collector has changed since an original collection attempt.

A debt collector may tailor the collection strategy depending on a variety of factors,

including the size and age of the debt and the debt collector’s assessment of the likelihood of

obtaining money from the consumer. For example, rather than engage in active debt collection

efforts by affirmatively locating and contacting consumers, some debt collectors collecting

relatively small debts—such as many medical, utility, and telecommunications debts—report the

debts to consumer reporting agencies and then wait for consumers to contact them after

discovering the debts on their consumer reports.

As discussed in the November 2020 Final Rule, a debt owner may also try to recover on a

debt through litigation.

And debt collectors sometimes attempt to collect debt for which the

applicable statute of limitations has expired. The length of the limitations period for debt

collection claims usually varies by State and debt type; most limitations periods are between

three and six years, although some are as long as 15 years. Currently, in most States, expiration

of the statute of limitations, if raised by the consumer as an affirmative defense, precludes the

debt collector from recovering on the debt through litigation, but it does not extinguish the debt

itself. If the debt is not extinguished, a debt collector may use non-litigation means, such as

letters and telephone calls, to collect a time-barred debt, as long as those means do not violate the

FDCPA or other laws.

Bureau of Consumer Fin. Prot., Consumer Credit Reports: A Study of Medical and Non-Medical Collections, a t 35-

36 (Dec. 2014), http://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-

medical-collections.pdf (CFPB Medical Debt Report).

See 85 FR 76735, 76736 (Nov. 30, 2020).

See 85 FR 12672, 12672-73 (Mar. 3, 2020).

C. Consumer Protection Concerns

As discussed in the November 2020 Final Rule, each year consumers submit tens of

thousands of complaints about debt collection to Federal regulators.

A significant proportion

of those complaints involve debts that consumers believe they do not owe, which may be

because the debt is being collected in error or because the consumer does not recognize the debt.

Consumers also file thousands of private actions each year against debt collectors who allegedly

have violated the FDCPA, including many cases alleging violations related to the validation

notice. Since the Bureau began operations in 2011, it has brought numerous debt collection

cases against third-party debt collectors, alleging both FDCPA violations and unfair, deceptive,

or abusive debt collection acts or practices in violation of the Dodd-Frank Act.

In many of

See, e.g., Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2020, a t 13

(Ma r. 2020), https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-repo rt -congress_03-2020.pdf (2020

FDCPA Annual Report); Fed. Trade Comm’n, 2019 Consumer Sentinel Network Databook, a t 7 (Jan. 2020),

https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-

2019/consumer_sentinel_network_data_book_2019.pdf; Bureau of Consumer Fin. Prot., Fair Debt Collection

Practices Act: CFPB Annual Report 2019, a t 15-16 (Mar. 2019),

https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2019.pdf (2019 FDCPA

Annual Report); Fed. Tra de Comm’n, 2018 Consumer Sentinel Network Databook, at 4, 7 (Feb. 2019),

https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-

2018/consumer_sentinel_network_data_book_2018_0.pdf; Bureau of Consumer Fin. Prot., Fair Debt Collection

Practices Act: CFPB Annual Report 2018, a t 14-15 (Mar. 2018),

https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2018.pdf (2018 FDCPA

Annual Report); Fed. Tra de Comm’n, 2017 Consumer Sentinel Network Databook, a t 3, 6 (Mar. 2018),

https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-

2017/consumer_sentinel_data_book_2017.pdf; Bureau of Consumer Fin. Prot., 2017 Fair Debt Collection Practices

Act: CFPB Annual Report 2017, at 15-16 (Mar. 2017),

https://files.consumerfinance.gov/f/documents/201703_cfpb_Fair-Debt-Collection-Practices-Act-Annual-Report.pdf

(2017 FDCPA Annual Report); Fed. Trade Comm’n, Consumer Sentinel Network Data Book for January—

December 2016, at 3, 6 (Ma r. 2017), https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-

data-book-january-december-2016/csn_cy-2016_data_book.pdf.

See, e.g., Stipula ted Final Judgment a nd Consent Order, Consumer Fin. Prot. Bureau v. Encore Capital Grp., Inc.,

3:20-cv-01750 (S.D. Cal. Oct. 15, 2020),

https://www.courtlistener.com/recap/gov.uscourts.casd.686719/gov.uscourts.casd.686719.5.1.pdf; Consent Order,

In re Asset Recovery Assocs., 2019-BCFP-0009 (Aug. 28, 2019),

https://www.consumerfinance.gov/documents/7938/cfpb_asset-recovery-associates_consent-order_2019-08.pdf;

Consent Order, In re Encore Capital Grp., Inc., 2015-CFPB-0022 (Sept. 9, 2015),

http://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf; Consent Order, In re

Portfolio Recovery Assocs., LLC, 2015-CFPB-0023 (Sept. 9, 2015),

these cases, the Bureau has obtained civil penalties, monetary compensation for consumers, and

other relief. In its supervisory work, the Bureau similarly has identified many FDCPA violations

during examinations of debt collectors. Over the past decade, the Federal Trade Commission

(FTC) and State regulators also have brought numerous additional actions against debt collectors

for violating Federal and State debt collection and consumer protection laws.

D. FDCPA and Dodd-Frank Act Protections for Consumers

Federal and State governments historically have sought to protect consumers from

harmful debt collection practices. From 1938 to 1977, the Federal government primarily

protected consumers through FTC enforcement actions against debt collectors who engaged in

unfair or deceptive acts or practices in violation of section 5 of the FTC Act.

When Congress

enacted the FDCPA in 1977, it found that “[e]xisting laws and procedures for

redressing . . . injuries [were] inadequate to protect consumers.”

Congress found that “[t]here

[was] abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by

many debt collectors” and that these practices “contribute to the number of personal

bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”

The FDCPA was enacted, in part, “to eliminate abusive debt collection practices by debt

collectors, [and] to insure that those debt collectors who refrain from using abusive debt

collection practices are not competitively disadvantaged.”

Among other things, the FDCPA:

http://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf; Complaint,

Consumer Fin. Prot. Bureau v. Nat’l Corrective Grp., Inc., 1:15-cv-00899-RDB (D. Md. Mar. 30, 2015),

http://files.consumerfinance.gov/f/201503_cfpb_complaint-national-corrective-group.pdf.

15 U.S.C. 45.

15 U.S.C. 1692(b).

15 U.S.C. 1692(a).

15 U.S.C. 1692(e).

(1) prohibits debt collectors from engaging in harassment or abuse, making false or misleading

representations, and engaging in unfair practices in debt collection; (2) restricts debt collectors’

communications with consumers and others; and (3) requires debt collectors to provide

consumers with disclosures concerning the debts they owe or allegedly owe.

The FDCPA, in general, applies to debt collectors as that term is defined under the

statute. As discussed further in the section-by-section analysis of § 1006.2(i) of the November

2020 Final Rule, the FDCPA generally provides that a debt collector is any person: (1) who uses

any instrumentality of interstate commerce or the mails in any business the principal purpose of

which is the collection of any debts (i.e., the “principal purpose” prong), or (2) who regularly

collects, or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or

due to another (i.e., the “regularly collects” prong). FDCPA section 803(6) also sets forth

several exclusions from the general definition.

Until the creation of the Bureau, no Federal agency was authorized to issue regulations to

implement the substantive provisions of the FDCPA. Courts have issued opinions providing

differing interpretations of various FDCPA provisions, and there is considerable uncertainty with

respect to how the FDCPA applies to communication technologies that have developed since

1977. The Dodd-Frank Act amended the FDCPA to provide the Bureau with authority to

“prescribe rules with respect to the collection of debts by debt collectors.”

III. Summary of the Rulemaking Process

A. The November 2020 Final Rule

The Bureau issued the November 2020 Final Rule to finalize certain provisions of the

proposed rule that the Bureau published in the Federal Register on May 21, 2019, to amend

FDCPA section 814(d), 15 U.S.C. 1692l(d).

Regulation F.

Specifically, the November 2020 Final Rule primarily addressed debt collection

communications and related practices by debt collectors. The November 2020 Final Rule

reserved certain sections of Regulation F in anticipation of this final rule.

B. The 2019 Proposal and 2020 Supplemental Proposal

As noted, on May 21, 2019, the Bureau published a proposed rule (the May 2019

proposal or proposal) in the Federal Register to amend Regulation F.

The proposal provided a

90-day comment period that would have closed on August 19, 2019. To allow interested persons

more time to consider and submit their comments, the Bureau issued an extension of the

comment period until September 18, 2019.

In response to the May 2019 proposal, the Bureau

received more than 14,000 comments from consumers, consumer groups, members of Congress,

other government agencies, creditors, debt collectors, industry trade associations, and others. As

discussed below, the Bureau has considered those comments in deciding to issue this final rule.

As relevant to this final rule, in the May 2019 proposal, the Bureau proposed to

implement and interpret FDCPA section 809(a) and (b) regarding the information that debt

collectors must provide to consumers at the outset of debt collection communications and debt

collectors’ obligations to respond to consumers’ disputes and requests for original-creditor

information, including if the consumer obligated or allegedly obligated to pay the debt has died.

The Bureau also proposed to prohibit debt collectors from bringing or threatening to bring a legal

action against a consumer to collect a debt that the debt collector knows or should know is a

time-barred debt. And the Bureau proposed to prohibit debt collectors from furnishing

See 84 FR 23274 (May 21, 2019).

Id.

84 FR 37806 (Aug. 2, 2019).

information regarding a debt to a consumer reporting agency before communicating with the

consumer about the debt.

On February 21, 2020, the Bureau released a supplemental notice of proposed rulemaking

to amend Regulation F to require debt collectors to make certain disclosures when collecting

time-barred debts (the February 2020 proposal).

The February 2020 proposal provided a 60-

day comment period that would have closed on May 4, 2020. To allow interested persons more

time to consider and submit their comments, the Bureau issued two extensions of the comment

period, the first until June 5, 2020, and the second until August 4, 2020.

In response to the

February 2020 proposal, the Bureau received approximately 90 comments from consumers,

consumer groups, members of Congress, other government agencies, creditors, debt collectors,

industry trade associations, and others. As discussed below, the Bureau has considered those

comments in adopting this final rule.

C. Consumer Testing

The Bureau has undertaken two rounds of qualitative disclosure testing and one round of

quantitative disclosure testing, all of which have informed this final rule.

First, as discussed in more detail in the May 2019 proposal, the Bureau in 2014

contracted with a third-party vendor, Fors Marsh Group (FMG), to assist with developing, and to

conduct qualitative consumer testing of the model validation notice.

This initial qualitative

See 85 FR 12672 (Mar. 3, 2020).

See 85 FR 17299 (Mar. 27, 2020) (first extension); 85 FR 30890 (May 21, 2020) (second extension).

The Bureau also tested a statement of consumer rights disclosure, but the Bureau decided not to propose to require

debt collectors to provide such a disclosure to consumers. Instead, the Bureau proposed in the May 2019 proposal to

require certain debt collectors to provide with the validation information a statement referring consumers to a

Burea u-provided website that would describe certain consumer protections in debt collection. See the section-by-

section analysis of § 1006.34(c)(3)(iv). Because the Bureau did not propose to require debt collectors to provide

consumers with a statement of consumer rights disclosure, the Bureau did not summarize testing rela ted to that

disclosure in the Ma y 2019 proposal.

testing included focus group testing, cognitive testing, and usability testing conducted by FMG.

Through the testing, the Bureau sought insight into consumers’ understanding of debt collection

protections and how consumers would interact with the forms if the forms were incorporated into

a final rule. Specific findings from the consumer testing are discussed in more detail in part V

where relevant. In conjunction with the release of the May 2019 proposal, the Bureau made

available a report prepared by FMG regarding the focus group testing,

the cognitive testing,

the usability testing,

and a report prepared by FMG summarizing the focus group testing,

cognitive testing, and usability testing.

Second, to obtain additional information about consumer comprehension and decision-

making in response to sample debt collection disclosures relating to time-barred debt, in 2017 the

Bureau contracted with ICF International, Inc. (ICF) to conduct a web survey of approximately

8,000 individuals possessing a broad range of demographic characteristics.

This quantitative

See 84 FR 23274, 23279 (May 21, 2019).

See generally Fors Marsh Grp., Debt Collection Focus Groups (Aug. 2014),

https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-focu s-group-report.pdf (FMG Focus Group

Report). The focus group testing wa s conducted in a ccordance with OMB control number 3170–0022, Generic

Information Collection Plan for the Development and/or Testing of Model Forms, Disclosures, Tools, and Other

Simila r Related Materials.

See generally Fors Marsh Grp., Debt Collection Cognitive Interviews (n.d.),

https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-cognitive-report.pdf (FMG Cognitive

Report). The cognitive testing wa s conducted in a ccordance with OMB control number 3170–0022, Generic

Information Collection Plan for the Development and/or Testing of Model Forms, Disclosures, Tools, a nd Other

Simila r Rela ted Materials.

See generally Fors Marsh Grp., Debt Collection User Experience Study (Feb. 2016),

https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-usability-report.pdf (FMG Usa bility

Report). Like the other testing, the usability testing was conducted in accordance with OMB control number 3170–

0022, Generic Information Collection Plan for the Development and/or Testing of Model Forms, Disclosures, Tools,

a nd Other Simila r Rela ted Materials.

See generally Fors Marsh Grp., Debt Collection Validation Notice Research: Summary of Focus Groups,

Cognitive Interviews, and User Experience Testing (Feb. 2016),

https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-summary-report.pdf (FMG Summary

Report).

OMB approved the Bureau’s request to conduct the survey on May 7, 2019. See Office of Information &

Regulatory Affairs, Office of Mgmt. & Budget, ICR—OIRA Conclusion,

https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201902-3170-001# (la st visited Feb. 18, 2020).

testing concluded in late September 2019, and, in conjunction with the release of the February

2020 proposal, the Bureau

and ICF

published detailed reports summarizing the testing

methodology and results. The February 2020 proposal provides an extensive overview of the

quantitative testing.

Third, to further evaluate the effectiveness of the model validation notice, the Bureau

contracted with FMG again in 2019 to conduct an additional round of qualitative testing.

Because of the COVID-19 pandemic, FMG conducted this consumer testing by telephone,

completing 51 one-on-one usability interviews between October 5 and October 15, 2020. The

qualitative testing showed, among other things, that 80 percent of participants shared positive

initial reactions to the model validation notice and indicated that the information in the notice

was clear and available actions were obvious. In addition, 88 percent of participants rated the

overall model validation notice as “very easy” or “easy” to understand, and no participants rated

the notice as “difficult” or “very difficult” to understand. Finally, 77 percent of participants

answered correctly over 90 percent of the time when, after reviewing the notice, they were asked

to answer certain questions about information included on the notice. In conjunction with

release of this final rule, the Bureau is making available a report prepared by FMG regarding the

qualitative testing.

See Bureau of Consumer Fin. Prot., Disclosure of Time-Barred Debt and Revival: Findings from the CFPB’s

Quantitative Disclosure Testing (Feb. 2020), https://files.consumerfinance.gov/f/documents/cfpb_debt-collection-

quantitative-disclosure-testing_report.pdf (CFPB Quantitative Testing Report).

See ICF Int’l, Inc., Quantitative Survey Testing of Model Disclosure Clauses and Forms for Debt Collection:

Methodology Report (Jan. 21, 2020), https://files.consumerfinance.gov/f/documents/cfpb_icf_debt-

survey_methodology-report.pdf.

See 85 FR 12672, 12676-77 (Mar. 3, 2020).

See generally Fors Marsh Grp., Consumer Financial Protection Bureau (CFPB) Usability Testing Report: Model

Validation Notice (Nov. 20, 2020), https://files.consumerfinance.gov/f/documents/cfpb_model-validation-

notice_report_2020-12.pdf (November 2020 Qualitative Testing Report).

D. Other Outreach

In November 2013, the Bureau began the rulemaking process with the publication of an

Advance Notice of Proposed Rulemaking (ANPRM) regarding debt collection.

As discussed

in the May 2019 proposal, the ANPRM sought information about a wide variety of both first-

and third-party debt collection practices. The Bureau received more than 23,000 comments in

response to the ANPRM, which the Bureau considered when developing the proposals.

To better understand the operational costs of debt collection firms, including law firms,

the Bureau also surveyed debt collection firms and vendors and published a report based on that

study in July 2016 (CFPB Debt Collection Operations Study or Operations Study).

The

Operations Study focused on understanding how debt collection firms obtain information about

delinquent consumer accounts and attempt to collect on those accounts.

In August 2016, the Bureau convened a Small Business Review Panel (Small Business

Review Panel or Panel) with the Chief Counsel for Advocacy of the Small Business

Administration (SBA) and the Administrator of the Office of Information and Regulatory Affairs

with the Office of Management and Budget (OMB).

As part of this process, the Bureau

prepared an outline of proposals under consideration and the alternatives considered (Small

The preamble to the May 2019 proposal includes a more thorough discussion of the outreach the Bureau

conducted prior to issuing the proposal. See 84 FR 23274, 23278-80 (May 21, 2019).

78 FR 67848 (Nov. 12, 2013).

See generally Bureau of Consumer Fin. Prot., Study of Third-Party Debt Collection Operations (July 2016),

https://www.consumerfinance.gov/documents/755/20160727_cfpb_Third_Party_Debt_Collection_Operations_Study

.pdf (CFPB Debt Collection Operations Study).

The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), a s amended by section 1100G(a)

of the Dodd-Frank Act, requires the Bureau to convene a Small Business Review Panel before proposing a rule that

ma y have a substantial economic im pact on a significant number of small entities. See Pub. L. 104-121, tit. II, 110

Stat. 857 (1996) (a s amended by the Small Business and Work Opportunity Act of 2007, Pub. L. 110-28, tit. VIII,

subtit. C, sec. 8302, 121 Stat. 204 (2007)).

Business Review Panel Outline or Outline),

which the Bureau posted on its website for review

by the small entity representatives participating in the Panel process and by the general public.

The Panel gathered information from the small entity representatives and made findings and

recommendations regarding the potential compliance costs and other impacts on those entities of

the proposals under consideration. Those findings and recommendations are set forth in the

Small Business Review Panel Report, which is part of the administrative record in this

rulemaking and is available to the public.

The Bureau considered these findings and

recommendations in preparing the proposals and this final rule.

The Bureau has also met on many occasions with various stakeholders, including

consumer advocates, debt collection trade associations, industry participants, academics with

expertise in debt collection, Federal prudential regulators, and other Federal and State consumer

protection regulators. The Bureau also received a number of comments specific to the debt

collection rulemaking in response to its Request for Information Regarding the Bureau’s

Adopted Regulations and New Rulemaking Authorities

and its Request for Information

Regarding the Bureau’s Inherited Regulations and Inherited Rulemaking Authorities;

the

Bureau considered these comments in developing the proposals and this final rule. In addition,

the Bureau has engaged in general outreach, speaking at consumer advocate and industry events

Bureau of Consumer Fin. Prot., Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking:

Outline of Proposals Under Consideration and Alternatives Considered (July 28, 2016),

https://files.consumerfinance.gov/f/documents/20160727_cfpb_Outline_of_proposals.pdf (Small Business Review

Panel Outline). The Bureau also gathered feedback on the Small Business Review Panel Outline from other

sta keholders, m embers of the public, a nd the Bureau’s Consumer Advisory Board and Community Bank Advisory

Council.

Bureau of Consumer Fin. Prot., U.S. Small Bus. Admin. & Office of Mgmt. & Budget, Final Report of the Small

Business Review Panel on the CFPB’s Proposals Under Consideration for the Debt Collector and Debt Buying

Rulemaking (Oct. 2016), https://files.consumerfinance.gov/f/documents/cfpb_debt-collector-debt-buyer_SBREFA-

report.pdf (Sm all Business Review Panel Report).

83 FR 12286 (Mar. 21, 2018).

83 FR 12881 (Mar. 26, 2018).

and visiting consumer organizations and industry stakeholders. The Bureau has provided other

regulators with information about the proposals and this final rule, has sought their input, and has

received feedback that has helped the Bureau to prepare this final rule.

Under the Dodd-Frank Act, the Bureau is required to conduct an assessment of

significant rules within five years of the rule’s effective date. The Bureau anticipates that this

final rule may be significant and therefore may require an assessment within five years of the

rule’s effective date. The Bureau is preparing now for this possible assessment. Specifically, the

Bureau is considering how best to obtain information now to serve as a baseline for evaluation of

the costs, benefits, and other effects of the final rule. The Bureau expects to collect data and

other information from consumers, debt collectors, and other stakeholders to understand whether

the rule is achieving its goals under the FDCPA and the Dodd-Frank Act, and to help the Bureau

measure the costs and benefits of the rule. Topics of data collection could include: whether

consumers are better able to identify a debt when receiving validation information after the rule

compared to before the rule; whether debt collectors are receiving higher or lower rates of

consumer disputes after the rule compared to before the rule; whether greater clarity about

FDCPA requirements helps reduce litigation related to the validation notice after the rule

compared to before the rule; and costs of the rule, both anticipated and unexpected, for

consumers or for industry. The Bureau expects to conduct outreach in 2021 to explore how best

to obtain such data, including potentially through surveying consumers or firms or by collecting

operational data.

IV. Legal Authority

The Bureau is issuing this final rule primarily pursuant to its authority under the FDCPA

and the Dodd-Frank Act. As amended by the Dodd-Frank Act, FDCPA section 814(d) provides

that the Bureau “may prescribe rules with respect to the collection of debts by debt collectors,”

as defined in the FDCPA.

Section 1022(a) of the Dodd-Frank Act provides that “[t]he Bureau

is authorized to exercise its authorities under Federal consumer financial law to administer,

enforce, and otherwise implement the provisions of Federal consumer financial law.”

Section

1022(b)(1) of the Dodd-Frank Act provides that the Director may prescribe rules and issue orders

and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry

out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions

thereof.

“Federal consumer financial law” includes title X of the Dodd-Frank Act and the

FDCPA.

No provisions in this final rule are based on section 1031 of the Dodd-Frank Act.

These and other authorities are discussed in greater detail in parts IV.A through C below.

Part IV.A discusses the Bureau’s authority under sections 806 through 808 of the FDCPA.

Parts IV.B through C discuss the Bureau’s relevant authorities under the Dodd-Frank Act.

A. FDCPA Sections 806 through 808

As discussed in part V, the Bureau is finalizing several provisions, in whole or in part,

pursuant to its authority to interpret FDCPA sections 806 through 808, which set forth general

prohibitions on, and requirements relating to, debt collectors’ conduct and are accompanied by

15 U.S.C. 1692l(d). As noted, the Bureau is the first Federal agency with authority to prescribe substantive debt

collection rules under the FDCPA. Prior to the Dodd-Frank Act’s gra nt of rulemaking a uthority to the Bureau, no

a gency had authority to issue substantive rules with respect to the collection of debts by debt collectors under the

FDCPA, but the FTC published various materials providing guidance on the FDCPA. The FTC’s materials have

informed the Bureau’s rulemaking and, if relevant to particular provisions, are discussed in part V.

12 U.S.C. 5512(a).

12 U.S.C. 5512(b)(1).

12 U.S.C. 5481(12)(H), (14).

The Bureau proposed to rely on its Dodd-Frank Act section 1031 authority (relating to unfair, deceptive, or

abusive acts or practices in connection with consumer financial products or services) to support two interventions in

the Ma y 2019 proposal. The Bureau h as not finalized a ny provisions of this final rule (or, as discussed in the

November 2020 Final Rule, of that final rule), pursuant to its authority under Dodd-Frank Act section 1031.

non-exhaustive lists of examples of unlawful conduct. The November 2020 Final Rule provides

an overview of how the Bureau interprets FDCPA sections 806 through 808.

FDCPA section 806 generally prohibits a debt collector from “engag[ing] in any conduct

the natural consequence of which is to harass, oppress, or abuse any person in connection with

the collection of a debt.”

Then, “[w]ithout limiting the general application of the foregoing,” it

lists six examples of conduct that violate that section.

Similarly, FDCPA section 807 generally

prohibits a debt collector from “us[ing] any false, deceptive, or misleading representation or

means in connection with the collection of any debt.”

Then, “[w]ithout limiting the general

application of the foregoing,” section 807 lists 16 examples of conduct that violate that section.

Finally, FDCPA section 808 prohibits a debt collector from “us[ing] unfair or unconscionable

means to collect or attempt to collect any debt.”

Then, “[w]ithout limiting the general

application of the foregoing,” FDCPA section 808 lists eight examples of conduct that violate

that section.

Consistent with the approach in the November 2020 Final Rule

and as proposed

in the May 2019 proposal,

the Bureau interprets FDCPA sections 806 through 808 in light of:

(1) the FDCPA’s language and purpose; (2) the general types of conduct prohibited by those

15 U.S.C. 1692d.

15 U.S.C. 1692d(1)-(6).

15 U.S.C. 1692e.

15 U.S.C. 1692e(1)-(16).

15 U.S.C. 1692f.

15 U.S.C. 1692f(1)-(8).

See 85 FR 76734, 76738 (Nov. 30, 2020).

84 FR 23274, 23281-82 (May 21, 2019).

sections and, where relevant, the specific examples enumerated in those sections; and (3) judicial

decisions.

In particular, the Bureau notes that, by their plain terms, FDCPA sections 806 through

808 make clear that their examples of prohibited conduct do not “limit[ ] the general application”

of those sections’ general prohibitions. The FDCPA’s legislative history is consistent with this

understanding,

as are opinions by courts that have addressed this issue.

Accordingly, the

Bureau may interpret the general provisions of FDCPA sections 806 to 808 to prohibit conduct

that the specific examples in FDCPA sections 806 through 808 do not address if the conduct

violates the general prohibitions. In addition, the Bureau uses the specific examples to inform its

understanding of the general prohibitions. The Bureau also interprets FDCPA sections 806

through 808 in light of the significant body of existing court decisions interpreting those

sections, including, where applicable, cases discussing the collection of time-barred debt.

Finally, consistent with the majority of courts, the Bureau interprets FDCPA sections 806

Where the Bureau prescribes requirements pursuant only to its a uthority to implement a nd interpret sections 806

through 808 of the FDCPA, the Bureau does not take a position on whether such practices also would constitute an

unfair, deceptive, or abusive act or practice under section 1031 of the Dodd-Frank Act.

See, e.g., S. Rep. No. 382, 95th

Cong., 1st Sess. 2, 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (S. Rep.

No. 382) (“[T]his bill prohibits in general terms any harassing, unfair, or deceptive collection practice. This will

enable the courts, where appropriate, to proscribe other improper conduct which is not specifically addressed.”).

Courts have also cited legislative history in noting that, “in passing the FDCPA, Congress identified abusive

collection a ttempts as primary motivations for the Act’s passage.” Hart v. FCI Lender Servs., Inc., 797 F.3d 219,

226 (2d Cir. 2015).

See, e.g., Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 450 (6th Cir. 2014) (“[T]he listed examples

of illega l a cts a re just that—examples.”).

Id. See, e.g., Holzman v. Malcolm S. Gerald & Assocs., 920 F.3d 1264 (11th Cir. 2019); Tatis v. Allied Interstate,

LLC, 882 F.3d 422 (3d Cir. 2018); Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679 (7th Cir. 2017), cert.

denied, 138 S. Ct. 736 (2018); Daugherty v. Convergent Outsourcing Inc., 836 F.3d 507 (5th Cir. 2016); Buchanan

v. Northland Grp., Inc., 776 F.3d 393 (6th Cir. 2015); McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th

Cir. 2014).

through 808 to incorporate an objective, “unsophisticated” or “least sophisticated” consumer

standard.

B. Dodd-Frank Act Section 1032

Dodd-Frank Act section 1032(a) provides that the Bureau may prescribe rules to ensure

that the features of any consumer financial product or service, “both initially and over the term of

the product or service,” are “fully, accurately, and effectively disclosed to consumers in a

manner that permits consumers to understand the costs, benefits, and risks associated with the

product or service, in light of the facts and circumstances.”

Under Dodd-Frank Act section

1032(a), the Bureau is empowered to prescribe rules regarding the disclosure of the “features” of

consumer financial products and services generally. Accordingly, the Bureau may prescribe

rules containing disclosure requirements even if other Federal consumer financial laws do not

specifically require disclosure of such features. Dodd-Frank Act section 1032(c) provides that,

in prescribing rules pursuant to Dodd-Frank Act section 1032, the Bureau “shall consider

available evidence about consumer awareness, understanding of, and responses to disclosures or

communications about the risks, costs, and benefits of consumer financial products or

services.”

The Bureau is finalizing §§ 1006.34 and 1006.38 based in part on its authority under

Dodd-Frank Act section 1032.

C. Other Authorities Under the Dodd-Frank Act

Section 1022(b)(1) of the Dodd-Frank Act provides that the Bureau’s Director “may

prescribe rules and issue orders and guidance, as may be necessary or appropriate to enable the

Bureau to administer and carry out the purposes and objectives of the Federal consumer financial

85 FR 76734, 76740 (Nov. 30, 2020); 84 FR 23274, 23282-83 (May 21, 2019).

12 U.S.C. 5532(a).

12 U.S.C. 5532(c).

laws, and to prevent evasions thereof.”

“Federal consumer financial laws” include the FDCPA

and title X of the Dodd-Frank Act.

Section 1022(b)(2) of the Dodd-Frank Act prescribes

certain standards for rulemaking that the Bureau must follow in exercising its authority under

Dodd-Frank Act section 1022(b)(1).

See part VII for a discussion of the Bureau’s standards for

rulemaking under Dodd-Frank Act section 1022(b)(2).

V. Section-by-Section Analysis

Subpart A—General

Section 1006.1 Authority, Purpose, and Coverage

1(c) Coverage

In the November 2020 Final Rule, the Bureau adopted § 1006.1(c)(1) to specify that,

except as provided in § 1006.108 and appendix A, Regulation F applies to debt collectors, as

defined in § 1006.2(i), other than a person excluded from coverage by section 1029(a) of the

Consumer Financial Protection Act of 2010, title X of the Dodd-Frank Act (12 U.S.C.

5519(a)).

The Bureau also noted that it was not finalizing, as part of the November 2020 Final

Rule, proposed § 1006.1(c)(2), which provided that certain provisions of Regulation F applied to

debt collectors only when they were collecting consumer financial product or service debt, as

defined in § 1006.2(f). The Bureau explained that it was not finalizing § 1006.1(c)(2) as part of

the November 2020 Final Rule because all of the provisions of that final rule apply to debt

collectors as defined in § 1006.2(i). The Bureau nevertheless reserved § 1006.1(c)(2) so that the

12 U.S.C. 5512(b)(1).

12 U.S.C. 5481(14).

12 U.S.C. 5512(b)(2).

85 FR 76734, 76742 (Nov. 30, 2020).

Bureau could clarify which provisions of this final rule, if any, apply to debt collectors only if

they are collecting debt related to a consumer financial product or service.

For the reasons discussed in the section-by-section analysis of § 1006.34, two provisions

of that section (§ 1006.34(c)(2)(iii) and (3)(iv)) apply to debt collectors only if they are

collecting debt related to a consumer financial produce or service as defined in § 1006.2(f).

Therefore, the Bureau is finalizing § 1006.1(c)(2) to provide that certain provisions of

Regulation F apply to debt collectors only if they are collecting debt related to a consumer

financial product or service as defined in § 1006.2(f), and to specify that those provisions are

§ 1006.34(c)(2)(iii) and (3)(iv).

Section 1006.2 Definitions

2(e) Consumer

FDCPA section 803(3) defines a consumer as any natural person obligated or allegedly

obligated to pay any debt.

The Bureau proposed § 1006.2(e) to implement this definition and

to interpret it to include a deceased natural person who is obligated or allegedly obligated to pay

a debt.

The Bureau explained that this interpretation would ensure that individuals trying to

resolve a deceased consumer’s debts have the same legal right to receive the validation notice,

and to dispute the debt and request information about the original creditor, as the deceased

consumer would have had.

As the Bureau noted in the November 2020 Final Rule, the Bureau received a number of

comments regarding its proposal to interpret the term consumer to include deceased natural

persons. The Bureau also noted that it had proposed that interpretation, in large part, to facilitate

15 U.S.C. 1692a(3).

See 84 FR 23274, 23288 (May 21, 2019).

delivery of validation notices under proposed § 1006.34 if the consumer obligated, or allegedly

obligated, on the debt has died. Further, the Bureau noted that it planned to address comments

received regarding that interpretation, and to determine whether to finalize that interpretation, as

part of this final rule. Thus, as finalized in the November 2020 Final Rule, § 1006.2(e) provides

that the term consumer means any natural person obligated or allegedly obligated to pay any

debt.

The Bureau now addresses comments received regarding its proposal to interpret the

definition to include deceased natural persons.

Several commenters supported the Bureau’s proposed interpretation. One industry

commenter stated that, in the decedent debt context, the person acting on behalf of a deceased

consumer’s estate should have the same rights regarding validation notices and disputes as the

consumer would have had if the consumer were still living. Another industry commenter

reported that many debt collectors currently attempt to treat deceased consumers as “consumers”

under the FDCPA and explained that the proposal would provide additional clarity that would

benefit both consumers and debt collectors in resolving the debts of deceased consumers. A

group of consumer advocates supported clarifying the rights of executors, administrators, and

personal representatives regarding validation notices and disputes. However, as discussed

below, these consumer advocate commenters opposed the proposed interpretation and suggested

a different way to address the issue.

Other commenters opposed interpreting the term consumer to include deceased natural

persons who are obligated or allegedly obligated to pay a debt. One industry commenter asserted

that the proposed interpretation would serve no purpose because deceased consumers lacked

For the reasons discussed in the November 2020 Final Rule, § 1006.2(e) as finalized in that rule also provides

that, for purposes of § 1006.6, the term consumer includes the persons described in § 1006.6(a). To account for a ny

revisions adopted in this final rule, it also specifies that the Bureau may further define the term in Regulation F to

clarify its application when the consumer is deceased. See 85 FR 76734, 76744-45, 76888 (Nov. 30, 2020).

privacy interests. A trade group commenter stated that no evidence of confusion existed in the

decedent debt context, and that the Bureau’s interpretation would expand the class of individuals

entitled to sue debt collectors for violations of the FDCPA and the final rule. Finally, a group of

consumer advocates suggested that the Bureau’s interpretation was unnecessary because

proposed comments 34(a)(1)–1 and 38–1 would clarify that a person who is authorized to act on

behalf of the deceased consumer’s estate operates as the consumer for purposes of

§§ 1006.34(a)(1) and 1006.38.

These commenters also stated that, if the Bureau were

attempting to change the class of individuals who may bring civil actions against debt collectors,

the FDCPA already allows any “person” to bring such claims.

For the reasons discussed below, the Bureau is revising § 1006.2(e), as set forth in the

November 2020 Final Rule, to clarify that the definition of consumer includes deceased natural

persons. As explained in the May 2019 proposal, the FDCPA does not specify whether a

consumer, as defined in section 803(3), includes a deceased consumer (or whether a natural

person, as that term is used in section 803(3), includes a deceased natural person).

Because the

definition of consumer in FDCPA section 803(3) is silent with respect to deceased consumers,

other FDCPA provisions that refer to a debt collector’s obligations to a consumer lack clarity in

the decedent debt context. For example, FDCPA provisions requiring debt collectors to provide

validation information, and to respond to disputes and requests for original-creditor information,

do not address situations in which the person obligated or allegedly obligated to pay the debt is

deceased. Uncertainty surrounding these provisions increases the risk of consumer harm in the

decedent debt context. Specifically, without validation information and an opportunity to dispute

See the section-by-section analyses of §§ 1006.34 a nd 1006.38.

See 84 FR 23274, 23288 (May 21, 2019).

the debt, individuals trying to resolve debts in a deceased consumer’s estate will lack information

needed to determine whether they are being asked to pay the right debt, in the right amount, and

to the right debt collector, and, consequently, whether they should assert dispute rights.

Accordingly, to increase clarity and to decrease the risk of consumer harm, the Bureau is

revising § 1006.2(e) to provide that the term consumer means any natural person, whether living

or deceased, obligated or allegedly obligated to pay any debt. The Bureau also is revising

§ 1006.2(e) to delete the statement that the Bureau may further define the term to clarify its

application when the consumer is deceased, since this final rule contains that further definition.

Relatedly, the Bureau is finalizing the commentary to §§ 1006.34(a)(1) and 1006.38 that clarifies

that a person who is authorized to act on behalf of the deceased consumer’s estate, such as the

executor, administrator, or personal representative, operates as the consumer for purposes of

§§ 1006.34(a)(1) and 1006.38.

Regarding the comment that deceased consumers have no privacy rights, the Bureau

disagrees. In its Policy Statement on Decedent Debt, the FTC prohibited debt collectors from

openly referring to a deceased consumer’s debts in communications with third parties, instead

adopting an approach that “balance[d] the legitimate needs of the collector with the privacy

In the proposal, the Bureau explained that its interpretation was “consistent with a modern trend in the la w that

favors recognizing, as a default, the continued existence of a natural person after death.” 84 FR 23274, 23288 (May

21, 2019). Consumer advocates pointed out that the authority cited for this proposition comes from contexts other

than the FDCPA. But these commenters do not explain why this fact undermines the existence of the trend

described by the Bureau.

interests of the decedent.”

In the November 2020 Final Rule, the Bureau took a similar

approach regarding location communications for decedent debt.

Moreover, interpreting the term consumer in § 1006.2(e) to include deceased natural

persons is supported by more than concern for a decedent’s privacy; it also clarifies debt

collector’s obligations to a consumer and, in turn, to those authorized to act on the consumer’s

behalf, if the consumer has died. This includes clarifying a debt collector’s obligations under the

FDCPA’s provisions, as implemented in this final rule and in the November 2020 Final Rule,

regarding validation information and disputes and requests for original-creditor information,

which help to ensure that consumers are not paying the wrong debt, in the wrong amount, to the

wrong debt collector.

This interpretation also clarifies the application of § 1006.22(f)(4), which the Bureau

adopted in the November 2020 Final Rule to prohibit debt collectors from communicating or

attempting to communicate with a person in connection with the collection of a debt through a

social media platform if the communication or attempt to communicate is viewable by the

general public or the person’s social media contacts.

In adopting that provision, the Bureau

discussed that a consumer advocate commenter had stated that the Bureau should broaden the

prohibition to apply to deceased consumers, such that debt collectors would be prohibited from

posting publicly about a deceased consumer’s alleged debt on the consumer’s social media page.

The consumer advocate commenter stated that a debt collector’s only reason for doing so would

Fed. Trade Comm’n, Statement of Policy Regarding Communications in Connection with the Collection of

Decedents’ Debts at 44921 (July 27, 2011),

https://www.ftc.gov/sites/default/files/documents/federal_register_notices/statement-policy-regarding-

communications-connection-collection-deced ents-debts-policy-statement/110720fdcpa.pdf (FTC Policy Statement

on Decedent Debt).

See 85 FR 76734, 76797-00, 76890, 76900 (Nov. 30, 2020).

See id. at 76836-39, 76892.

be to pressure surviving relatives to pay the debt, either to protect the deceased consumer’s

reputation or out of a sense of moral obligation.

In finalizing § 1006.22(f)(4) in the November 2020 Final Rule, Bureau noted that the

prohibition applied to communications and attempts to communicate with “a person,” and that

person, as defined in § 1006.2(k), includes a consumer. The Bureau again noted that it had

received a number of comments regarding its proposal to interpret the term consumer to include

deceased natural persons and that it would address such comments in this final rule. In

determining to revise § 1006.2(e) to include a deceased natural person who is obligated or

allegedly obligated to pay a debt, the Bureau thus also clarifies that the prohibition in

§ 1006.22(f)(4) includes deceased consumers.

The Bureau disagrees with the industry commenter that there is no evidence of confusion

about the definition of consumer in the decedent debt context. As explained above, the

FDCPA’s current lack of clarity in the decedent debt context creates uncertainty in several

situations arising during the collection of debts belonging to deceased consumers. Therefore, the

Bureau determines that additional clarity will improve the debt collection system for all parties.

Nor does § 1006.2(e) expand the class of potential plaintiffs who may bring suit under the

FDCPA and Regulation F, as an industry commenter alleged. The civil liability provision of the

FDCPA already creates liability for violations committed against any person.

As noted in the

proposal, the trend in the law has been to recognize, as a default, the continued existence of a

natural person after death for purposes of bringing civil actions, particularly for remedial statutes

See id. at 76836-39.

15 U.S.C. 1692k.

like the FDCPA.

This commenter did not explain how the Bureau’s interpretation would result

in a lawsuit by someone other than a “person” under the statute.

Finally, the Bureau disagrees, as suggested by certain commenters, that the commentary

to §§ 1006.34(a)(1) and 1006.38 (final comments 34(a)(1)–1 and 38–3) provide adequate clarity

without interpreting the term consumer to include deceased natural persons. In fact, interpreting

the term consumer to include deceased natural persons is a necessary predicate to provide that

the persons identified in those comments operate as the consumer for purposes of the

requirements relating to validation information, disputes, and requests for original-creditor

information.

Commenters raised additional issues related to § 1006.2(e). A few industry commenters

suggested that the Bureau’s proposed interpretation was inconsistent with the Bureau’s mortgage

servicing rules regarding successors in interest. One trade group commenter stated that allowing

any individual authorized to act on behalf of a deceased consumer’s estate to meet

Regulation F’s definition of consumer under § 1006.2(e) will complicate and potentially impede

the existing successor in interest process under Regulations X and Z. The commenter explained

that, under proposed comment 34(a)(1)–1, mortgage servicers who are also debt collectors under

Regulation F would have to send validation information to the person authorized to act on behalf

of the deceased consumer’s estate but would not be able to send foreclosure-related disclosures

required under State law to the same person, unless that person had assumed ownership of the

obligation. The commenter also suggested that, under proposed comment 38–1, debt collectors

would be required to focus resources on verifying the identify of an individual asserting to be a

See 84 FR 23274, 23288 (May 21, 2019).

person authorized to act on behalf of the deceased consumer’s estate, which would take away

from legitimate efforts to respond to disputes and requests for original-creditor information.

Another trade group commenter stated that the clarification in proposed comment

34(a)(1)–1 to send the validation notice to the person authorized to act on behalf of the deceased

consumer’s estate if the debt collector knows or should know that the consumer is deceased

would, unlike the Bureau’s mortgage servicing rules, appear to create an affirmative obligation

for mortgage servicers to track down information about potential successors in interest and cloud

requirements for mortgage servicers under Regulation X. For this reason, a third trade group

commenter suggested that, if a required notice must be sent and no individual has come forward

as a potential or confirmed successor in interest, the Bureau should permit mortgage servicers to

address a validation notice to the deceased consumer or “the estate of” the deceased consumer

rather than require a search for an individual to whom to address the notice.

As the Bureau has previously explained, while many mortgage servicers are not subject

to the FDCPA, mortgage servicers that acquired a mortgage loan at the time that it was in default

may be subject to the FDCPA with respect to that mortgage loan.

As discussed below, the

Bureau concludes that including a deceased natural person who is obligated or allegedly

obligated to pay a debt within the definition of consumer under § 1006.2(e) is not inconsistent

with the Bureau’s mortgage servicing rules on successors in interest. Although one commenter

asserted that finalizing this definition as proposed would complicate and potentially impede the

existing successor in interest process, the commenter failed to explain why that would be the

case and the Bureau does not believe that to be the case.

See 85 FR 76734, 76758 (Nov. 30, 2020); 81 FR 71977, 71978 (Oct. 19, 2016).

Regarding delivery of validation information, as discussed below, comment 34(a)(1)–1

clarifies that, if a debt collector knows or should know that a consumer is deceased, and if the

debt collector has not previously provided the validation information to the deceased consumer,

then in such circumstances, to comply with § 1006.34(a)(1), a debt collector must provide the

validation information to an individual whom the debt collector identifies by name and who is

authorized to act on behalf of the deceased consumer’s estate.

A person who is authorized to

act on behalf of a deceased consumer’s estate may include the executor, administrator, or

personal representative. However, as discussed in the November 2020 Final Rule, for purposes

of Regulations X and Z, a successor in interest is, in general, a person to whom an ownership

interest either in a property securing a mortgage loan subject to subpart C of Regulation X, or in

a dwelling securing a closed-end consumer credit transaction under Regulation Z, is transferred

under specified circumstances including, for example, after a consumer’s death or as part of a

divorce.

Therefore, a person who is authorized to act on behalf of a deceased consumer’s

estate for purposes of Regulation F may or may not also be a successor in interest under

Regulations X and Z, depending on whether an ownership interest in a property securing a

mortgage loan or a dwelling securing a closed-end consumer credit transaction is transferred to

that person under the circumstances specified in Regulations X and Z.

Comment 34(a)(1)–1 provides debt collectors clarity regarding to whom the validation

information must be provided in the narrow circumstance in which the debt collector knows or

See the section-by-section analysis of § 1006.34(a)(1).

See 85 FR 76734, 76758-59 (Nov. 30, 2020). See a l so 12 CFR 1024.31, 1026.2(a)(27)(i). A confirmed successor

in interest, in turn, means a successor in interest once a mortgage servicer has confirmed the successor in interest’s

identity and ownership interest in the property that secures the mortgage loan or in the dwelling. See 12 CFR

1024.31, 1026.2(a)(27)(ii).

12 CFR 1024.31, 1026.2(a)(27).

should know that a consumer is deceased and the debt collector has not previously provided the

validation information to the deceased consumer. According to the comment, under these

circumstances, a debt collector who is collecting the debt of a deceased consumer must

determine who is authorized to act on behalf of a deceased consumer’s estate. These efforts,

however, do not create an affirmative obligation under the Bureau’s mortgage servicing rule for

a mortgage servicer that is subject to the FDCPA with respect to a mortgage loan to seek out

potential successors in interest within the meaning of the mortgage servicing rules. Under the

mortgage servicing rules, a mortgage servicer is not required to conduct a search for potential

successors in interest if the mortgage servicer has not received actual notice of their existence.

If, in the course of determining who is authorized to act on behalf of a deceased consumer’s

estate for purposes of § 1006.34(a)(1), a mortgage servicer receives actual notice of the existence

of a potential successor in interest, the mortgage servicer must, as required under Regulation X,

maintain policies and procedures reasonably designed to ensure that the servicer can retain this

information and promptly facilitate communication with the potential successor in interest.

However, because a mortgage servicer that is subject to the FDCPA with respect to a mortgage

loan may comply with both this final rule and the applicable successor in interest provisions

under Regulations X and Z, the Bureau concludes there is no conflict with the mortgage

servicing rules. Additionally, nothing in this final rule is intended to alter the successor in

interest provisions in Regulations X and Z or to impose additional requirements under

Regulations X and Z.

12 CFR 1024.38(b)(1)(vi); comment 38(b)(1)(vi)–1.

Id. The general servicing policies, procedures, and requirements in 12 CFR 1024.38 do not apply to a m ortgage

servicer that qualifies as a small servicer pursuant to 12 CFR 1026.41(e). See 12 CFR 1024.30(b)(1).

In response to the commenter’s concern regarding the burdens under comment 38–1 of

determining who is authorized to act on behalf of a deceased consumer’s estate before

responding to a dispute or request for original-creditor information, the potential burdens

associated with responding to such incoming disputes and requests will be significantly reduced

once a debt collector has procedures in place to make that threshold determination or has already

made that determination for purposes of providing the validation information as described in

comment 34(a)(1)–1.

The Bureau declines to adopt the suggestion to allow mortgage servicers to address a

validation notice to the deceased consumer or to “the estate of” the deceased consumer. As

discussed in the proposal, the Bureau shares the view of the FTC, which stated in its Policy

Statement on Decedent Debt that individuals who lack the authority to resolve the estate but who

wish to be helpful are likely to open communications addressed to the decedent’s estate, or to an

unnamed executor or administrator, which makes such communications insufficiently targeted to

a consumer with whom the debt collector may generally discuss the debt.

The Bureau,

therefore, shares the view of the FTC that “communication[s] addressed to the decedent’s estate,

or an unnamed executor or administrator, [are] location communication[s] and must not refer to

the decedent’s debts.”

Accordingly, comment 34(a)(1)–1 specifies that a debt collector must

provide the validation information to an individual that the debt collector identifies by name who

is authorized to act on behalf of the deceased consumer’s estate.

A group of consumer advocates stated that certain other provisions of the Bureau’s

proposal, such as § 1006.14(e)’s prohibition on publishing lists of consumers who allegedly

See 84 FR 23274, 23334 (May 21, 2019).

FTC Policy Statement on Decedent Debt, supra note 73, at 44920.

refuse to pay debts and § 1006.18(b)(1)(iv)’s prohibition on falsely representing or implying that

the consumer committed any crime or other conduct in order to disgrace the consumer, should

apply to deceased consumers. But, these commenters claimed, other provisions, like

§ 1006.6(b)(1)’s restrictions on communicating at inconvenient times or places, were nonsensical

as applied to deceased consumers. Therefore, these commenters argued, the Bureau’s

interpretation in proposed § 1006.2(e) was overbroad.

The Bureau acknowledges that there may be certain provisions in the November 2020

Final Rule and in this final rule that refer to a consumer that simply will be inapplicable in the

context of a deceased consumer.

Nevertheless, as consumer advocates acknowledged, other

provisions that refer to a consumer will apply to deceased consumers. For example, as discussed

above, interpreting the term consumer in § 1006.2(e) to include deceased natural persons means

that, as applied to § 1006.22(f)(4), debt collectors are prohibited from posting publicly about a

deceased consumer’s alleged debt on a deceased consumer’s public-facing social media page. In

situations that are currently unclear, such as delivery of validation information, the final rule

adopts commentary clarifying debt collectors’ obligations.

This group of consumer advocates also recommended that the Bureau require debt

collectors to provide a validation notice to the person authorized to act on behalf of the deceased

consumer’s estate even if validation information already was provided to the consumer. These

commenters also asked the Bureau to provide that the validation period starts from the date the

person authorized to act on behalf of the deceased consumer’s estate receives the validation

For example, § 1006.6(b) restricts, among other things, the times at which debt collectors can communicate or

attempt to communicate with consumers. See 85 FR 76734, 76889 (Nov. 30, 2020). To the extent that

“communicate” includes having a conversation, the Bureau believes it is obvious that this prohibition is simply

inapplicable in the case of a deceased consumer (but does apply to having a conversation with the executor or

a dm inistrator of the consumer’s estate).

notice, and to require debt collectors to respond to disputes and requests for original-creditor

information submitted by this person, even if a response already was provided to the consumer.

The Bureau declines to adopt these suggestions because the Bureau finds that, in the scenario

described, the debt collector has already satisfied the debt collector’s obligations to the consumer

as set forth in FDCPA section 809 and §§ 1006.34 and 1006.38. Depending on the facts, the

debt collector could be required to provide a validation notice or dispute response to the person

authorized to act on behalf of the deceased consumer’s estate,

but the Bureau declines to

require debt collectors to do so in all cases. Nevertheless, the Bureau notes that debt collectors

who voluntarily provide validation notices after a consumer dies (as some industry commenters

reported is done), and who, in doing so, start a new validation period, do not thereby violate the

FDCPA or Regulation F.

For the reasons discussed above, and pursuant to its authority under FDCPA section

814(d) to prescribe rules with respect to the collection of debts by debt collectors, the Bureau is

finalizing § 1006.2(e) as proposed to interpret the definition of consumer in FDCPA section

803(3) to mean any natural person, whether living or deceased, who is obligated or allegedly

obligated to pay any debt.

2(f) Consumer Financial Product or Service

As discussed in the November 2020 Final Rule, the Bureau proposed § 1006.2(f) to

define consumer financial product or service debt to mean any debt related to any consumer

financial product or service, as consumer financial product or service is defined in section

1002(5) of the Dodd-Frank Act.

As also discussed in the November 2020 Final Rule, the

See the section-by-section analysis of § 1006.34(b)(5).

85 FR 76734, 76745 (Nov. 30, 2020).

Bureau did not finalize § 1006.2(f) as part of that rulemaking because the Bureau did not finalize

in that rulemaking any provisions for which the definition in proposed § 1006.2(f) would have

been relevant.

For the reasons discussed in the section-by-section analyses of §§ 1006.1(c) and 1006.34,

the Bureau is adopting in this final rule two provisions (§ 1006.34(c)(2)(iii) and (3)(iv)) that

apply to debt collectors only if they are collecting debt related to a consumer financial product or

service. This includes, for example, debt collectors collecting debts related to consumer

mortgage loans or credit cards.

To facilitate compliance with those provisions, the Bureau is

adopting § 1006.2(f) to provide that consumer financial product or service has the meaning in

section 1002(5) of the Dodd-Frank Act (12 U.S.C. 5481(5)).

The Bureau notes that it originally proposed § 1006.2(f) to define the term “consumer

financial product or service debt.” However, because the relevant defined term in the Dodd-

Frank Act is “consumer financial product or service,” and because certain commenters observed

that including two definitions of the term “debt” in the rule would be confusing, the Bureau is

finalizing § 1006.2(f) to provide that the defined term in the rule is “consumer financial product

or service” and that the term has the same meaning given to it in section 1002(5) of the Dodd-

Frank Act.

Subpart B—Rules for FDCPA Debt Collectors

Section 1006.26 Collection of Time-Barred Debts

The May 2019 proposal and the February 2020 proposal both addressed the collection of

time-barred debt. In the May 2019 proposal, the Bureau proposed to define several terms

(proposed § 1006.26(a)) and to prohibit debt collectors from bringing or threatening to bring

See 84 FR 23274, 23286 (May 21, 2019).

legal actions against consumers to collect certain time-barred debts (proposed § 1006.26(b)). In

the February 2020 proposal, the Bureau proposed to require debt collectors to provide

disclosures if collecting certain time-barred debts (proposed § 1006.26(c)). The February 2020

proposal also included model language and forms that debt collectors could use to comply with

the proposed disclosure requirements. In the November 2020 Final Rule, the Bureau noted that

it planned to address its proposals regarding time-barred debt in this final rule, and the Bureau

reserved § 1006.26 for that purpose. After considering the comments received in response to

both the May 2019 and February 2020 proposals, the Bureau is now finalizing proposed

§ 1006.26(a) and (b) with modifications as described below. The Bureau is not finalizing

proposed § 1006.26(c).

26(a) Definitions

Proposed § 1006.26(a) defined two terms not defined in the FDCPA: statute of

limitations and time-barred debt. The Bureau proposed to define these terms to facilitate

compliance with proposed § 1006.26(b) and (c). As discussed below, the Bureau is finalizing

§ 1006.26(a) as proposed. The Bureau is finalizing § 1006.26(a) pursuant to its authority under

FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt

collectors.

26(a)(1) Statute of Limitations

Proposed § 1006.26(a)(1) defined the term statute of limitations to mean the period

prescribed by applicable law for bringing a legal action against the consumer to collect a debt.

Statutes of limitation, which typically are established by State law, provide time limits for

bringing suit on legal claims. As the Bureau explained in the May 2019 proposal, statutes of

See 84 FR 23274, 23327-28 (May 21, 2019).

limitation serve several purposes.

First, statutes of limitations advance a defendant’s interest in

repose. That is, they reflect a legislative judgment that it is “unjust to fail to put the adversary on

notice to defend within a specified period of time.”

Second, statutes of limitations eliminate

stale claims. That is, they protect defendants and the courts from having to deal with cases in

which “the search for truth may be seriously impaired by the loss of evidence, whether by death

or disappearance of witnesses, fading memories, disappearance of documents, or otherwise.”

Third, statutes of limitations provide “certainty about a plaintiff’s opportunity for recovery and a

defendant’s potential liabilities.”

For debt collection claims, the length of the applicable statute

of limitations often varies by State and, within each State, by debt type. Although most statutes

of limitations applicable to debt collection claims are between three and six years, some are as

long as 15 years.

Several commenters addressed proposed § 1006.26(a)(1). One industry commenter

confirmed that the proposed definition of statute of limitations comported with debt collectors’

understanding of the term. A number of other industry commenters requested that the Bureau

modify the definition to account for the fact that it can be challenging to determine the applicable

statute of limitations in certain circumstances. For example, two industry commenters requested

that the Bureau clarify that, in determining the applicable statute of limitations, a debt collector

need only conduct a reasonable investigation based on objectively ascertainable facts, and that a

debt collector would only be charged with knowing that the statute of limitations has expired if

the law is clearly established. The commenters also requested that the Bureau more specifically

See generally Rotella v. Wood, 528 U.S. 549, 555 (2000) (identifying “the basic policies of all limitations

provisions” as “repose, elimination of stale claims, and certainty”).

United States v. Kubrick, 444 U.S. 111, 117 (1979).

Id.

Young v. United States, 535 U.S. 43, 47 (2002) (quoting Rotella, 528 U.S. at 555).

define certain elements of the term statute of limitations to lessen the burden on debt collectors

of determining whether a debt is time barred. For example, they suggested defining “applicable

law” as the law of the jurisdiction where the consumer resides or is believed to reside at the time

collections begin, or the law of the jurisdiction in which the consumer signed any underlying

contract. Commenters suggested that these changes would make it easier for a debt collector to

determine the statute of limitations applicable to a particular debt while protecting a debt

collector from liability when it is difficult determine the exact date on which a debt becomes

time barred.

The Bureau is finalizing § 1006.26(a)(1) as proposed. As industry commenters

confirmed, the definition of statute of limitations in § 1006.26(a)(1) is consistent with debt

collectors’ understanding of the term. The Bureau declines to modify the definition to identify

the type of investigation a debt collector must or should undertake to ascertain the applicable

statute of limitations. The Bureau also declines to define the term “applicable law” in the

manner requested by commenters. The Bureau recognizes that, in some cases, it can be

challenging and costly for a debt collector to determine what statute of limitations applies to a

legal action against the consumer to collect a particular debt, and that, in some cases, the

commenters’ suggestions could reduce those challenges and costs. The Bureau declines,

however, to address the challenges and costs associated with determining whether a debt is time

barred by modifying the definition of statute of limitations, a term with a meaning widely

understood by debt collectors, or by defining new terms. Comments relating to the difficulty of

determining whether a debt is time barred are discussed further in the section-by-section analysis

of § 1006.26(b).

26(a)(2) Time-Barred Debt

Proposed § 1006.26(a)(2) defined the term time-barred debt to mean a debt for which the

applicable statute of limitations has expired.

As the Bureau explained in the May 2019 proposal, many debt collectors already

determine whether the statute of limitations applicable to a debt has expired. Some do so to

comply with State and local disclosure laws that require them to inform consumers when debts

are time barred.

Others do so to assess whether they can sue to collect the debt, which may

affect their collection strategy. In addition, the information that debt buyers generally receive

when bidding on and purchasing debts, and the information that other debt collectors generally

receive at placement, may allow them to determine whether the applicable statute of limitations

has expired.

Several commenters addressed proposed § 1006.26(a)(2). An industry commenter

confirmed that the proposed definition comported with debt collectors’ understanding of the

term. Two other industry commenters expressed concern that the term time-barred debt may

imply that a debt collector has no right at all to collect the debt, whereas in most jurisdictions a

debt’s time-barred status only limits the debt collector’s right to recover on the debt through a

lawsuit. Several industry commenters expressed concern that the proposal seemed to

See 84 FR 23274, 23328 (May 21, 2019).

See, e.g., Cal. Civ. Code sec. 1788.52(d)(3); Conn. Gen. Stat. sec. 36a-805(a)(14); Mass. Code Regs., tit. 940,

§ 7.07(24); N.M. Code. R. sec. 12.2.12.9(A); N.Y. Comp. Codes R. & Regs., tit. 23, sec. 1.3; New York City, N.Y.,

Rules, tit. 6, sec. 2-191(a); W. Va. Code sec. 46a-2-128(f).

See Fed. Tra de Comm’n, The Structure and Practices of the Debt Buying Industry, a t 49 (Ja n. 2013),

https://www.ftc.gov/sites/default/files/documents/reports/structure-and-practices-debt-buying-

industry/debtbuyingreport.pdf (FTC Debt Buying Report) (“The data the Commission received from debt buyers

suggests that debt buyers usually are likely to know or be able to determine whether the debts on which they are

collecting a re beyond the statute of lim ita tions.”). Similarly, the majority of respondents to the Bureau’s Debt

Collection Operations Study reported always or often receiving certain inf ormation and documentation that may be

relevant to determining whether a debt is time barred, such a s debt balance at charge off, account agreement

documentation, a nd billing sta tements. See CFPB Debt Collection Operations Study, supra note 37, at 23.

contemplate that a debt is a single amount that becomes time barred at a single moment in time

and noted that not all debts operate in that manner. For example, these commenters stated that

an installment loan could become time barred on a rolling basis depending on when each

installment was due. In addition, according to some commenters, a legal action to collect a debt

may be based on more than one legal theory or involve more than one cause of action, and each

theory or cause of action may be subject to a different statute of limitations. Similarly, according

to some commenters, certain secured debts may be subject to more than one method of suit and

more than one statute of limitations. For example, these commenters asserted, in some States a

mortgagee may choose whether to pursue a remedy at law on the note, a remedy in equity on the

mortgage, or both, and the statute of limitations applicable to these claims may differ. Relatedly,

one industry commenter asked the Bureau to clarify that debt collectors are not prohibited from

taking legal action to enforce a lien even if a claim on the underlying obligation is time barred.

Alternatively, the commenter asked the Bureau to clarify that the requirements of proposed

§ 1006.26 would apply only when all causes of action associated with the underlying note and

with the security instrument are time barred.

The Bureau is finalizing § 1006.26(a)(2) as proposed. As industry commenters

confirmed, the definition of time-barred debt in § 1006.26(a)(2) is consistent with debt

collectors’ understanding of the term. In response to commenters’ concerns that the term time-

barred debt might imply that a debt collector has no right to collect the debt, the Bureau notes

Another commenter seeking clarification on the scope of proposed § 1006.26(b) a sserted that in rem enforcement

of a security instrument is not inherently debt collection. The Bureau notes that § 1006.26, like the rest of this final

rule, a pplies only to FDCPA debt collectors. The Supreme Court recently held that a business engaged in no more

than nonjudicial foreclosure proceedings is not an FDCPA debt collector, except for the limited purpose of FDCPA

section 808(6). See Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019). FDCPA section 808(6)

specifically prohibits taking or threatening to take any nonjudicial action in certain circumstances, such as where

there is no present right to possession through an enforceable security instrument.

that, in most jurisdictions, as commenters observed and as is discussed in the section-by-section

analysis of § 1006.26(b), a debt is not extinguished when the statute of limitations expires.

Rather, in these jurisdictions, a debt collector still may collect the debt using non-litigation

means, such as telephone calls and letters, and the Bureau’s use of the term time-barred debt

neither changes that fact nor is meant to imply otherwise. With respect to industry commenters’

concern about debts for which multiple statutes of limitation may be relevant, the Bureau notes

that a debt is a time-barred debt under § 1006.26(a)(2) if the applicable statute of limitations has

expired. The applicable statute of limitations depends on the specific legal action the debt

collector takes or represents that it will take. For some debts, such as certain installment loans

and secured debts, it may be the case that one claim associated with a debt is time barred while

another claim associated with the debt is not. In such a case, the prohibitions in § 1006.26(b)

apply to the time-barred claim only.

26(b) Legal Actions and Threats of Legal Actions Prohibited

The Bureau proposed § 1006.26(b) to prohibit a debt collector from bringing or

threatening to bring a legal action against a consumer to collect a debt that the debt collector

knows or should know is a time-barred debt.

100

In response to comments, the Bureau is

finalizing proposed § 1006.26(b) with two principal changes. First, the Bureau is not adopting

the proposed knows-or-should-know standard; instead, a debt collector may violate final

§ 1006.26(b) even if the debt collector neither knew nor should have known that a debt was time

barred. Second, consistent with the Supreme Court’s decision in Midland Funding, LLC v.

100

See 84 FR 23274, 23328-29 (May 21, 2019).

Johnson, the final rule clarifies that the prohibitions in § 1006.26(b) do not apply to proofs of

claim filed in bankruptcy proceedings.

101

Prohibitions

As the Bureau explained in the May 2019 proposal, in most States the expiration of the

applicable statute of limitations, if raised by the consumer as an affirmative defense, precludes

the debt collector from recovering on the debt using judicial processes, but it does not extinguish

the debt itself.

102

In other words, in most States a debt collector may use non-litigation means to

collect a time-barred debt, as long as those means do not violate the FDCPA or other laws. If a

debt collector does sue to collect a time-barred debt, and if the consumer proves the expiration of

the statute of limitations as an affirmative defense, the court will dismiss the suit.

Suits and threats of suit on time-barred debts can harm consumers in multiple ways. A

debt collector’s threat to sue on a time-barred debt may prompt some consumers to pay or

prioritize that debt over others in the mistaken belief that doing so is necessary to avoid

litigation. In some jurisdictions, a consumer’s payment on or acknowledgement of a debt can

revive the debt collector’s right to sue for the entire amount, opening the consumer to new legal

liability.

103

Similarly, suits on time-barred debts may lead to judgments against consumers on

101

137 S. Ct. 1407 (2017).

102

See generally Midland Funding, LLC v. Johnson, 137 S. Ct. 1407, 1411-12 (2017) (noting that under “the law of

many States . . . a creditor has the right to payment of a debt even after the limitations period expires,” and

collecting Sta te la ws). In Mississippi a nd Wisconsin, however, debts are extinguished when the applicable statute of

limita tions expires. See Miss. Code Ann. sec. 15-1-3 (“The completion of the period of limitation prescribed to bar

a ny a ction, shall defeat a nd extinguish the right a s well a s the remedy.”); Wis. Sta t. Ann. sec. 893.05 (“When the

period within which an action may be commenced on a Wisconsin cause of action has expired, the right is

extinguished as well as the remedy.”).

103

Revival extinguishes the consumer’s right to raise the expiration of the statute of lim itations a s an affirmative

defense to litigation; that is, it revives the debt collector’s right to sue to collect the debt. Although State revival

laws vary, there are generally several circumstances in which revival occurs. First, in som e States, a consumer’s

partial payment on a time-barred debt revives the debt collector’s right to sue. Second, in some States, a consumer’s

written a cknowledgement of a time-barred debt revives the debt collector’s right to sue. Third, a consumer’s oral

claims for which those consumers had meritorious defenses, including defenses based on the

statute of limitations. Few consumers who are sued for allegedly unpaid debts—whether time

barred or not—actually defend themselves in court, and those who do often are unrepresented.

As a result, the vast majority of judgments on unpaid debts, including on time-barred debts, are

default judgments, entered solely on the representations contained in the debt collector’s

complaint.

104

Consumer and consumer advocate commenters generally supported the prohibitions in

proposed § 1006.26(b). Many of these commenters also argued that, to prevent deception, the

Bureau should prohibit the collection of time-barred debt altogether, even though the Bureau did

not propose such a prohibition in the May 2019 proposal or the February 2020 proposal. The

Bureau certainly supports measures to prevent deception because of the harm it causes to

consumers. However, the Bureau concludes that is not necessary to ban the collection of time-

barred debt to prevent potential deception. As discussed in the February 2020 proposal, the

a cknowledgement of a time-barred debt may revive the debt collector’s right to sue in some States. See, e.g., Lima

v. Schmidt, 595 So. 2d 624, 631 (La. 1992) (“Our courts have consistently held that renunciation must be clear,

direct, and absolute and manifested by words or actions of the party in whose favor prescription has run.”) (citations

omitted); 22 Tenn. Pract. Contract Law and Practice § 12:88 (rev. Aug. 2020) (“[T]he defendant may revive a

plaintiff’s remedy that has been barred by the statute of limitations. This event can occur either when the defendant

expressly promises to pay a debt or when the defendant acknowledges the debt and expresses a willingness to pa y it

. . . . The expression of a defendant’s willingness to pay might be implied from the words or action of a

debtor . . . .”) (cita tions and internal quotation marks omitted).

104

See FTC Debt Buying Report, supra note 98, at 45 (observing that “90 percent or more of consumers sued in

[debt collection actions] do not appear in court to defend,” which “creates a risk that consumer will be subject to a

default judgment on a time-barred debt”); Peter A. Holland, The One Hundred Billion Dollar Problem in Small

Claims Court: Robo-Signing and Lack of Proof in Debt Buyer Cases, 6 J. Bus. & Tech. L. 259, 265 (2011) (“In the

ma jority of debt buyer cases, the courts gra nt the debt buyer a default judgment because the consumer has failed to

appear for trial. . . . Debtors who do receive notice usually appear without legal representation.”); CFPB Debt

Collection Operations Study, supra note 37, a t 18 (observing that respondents reported obtaining default judgments

in 60 to 90 percent of their filed suits); cf. Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480, 1478 (M.D. Ala. 1987)

(“Because few unsophisticated consumers would be aware that a statute of limitations could be used to defend

against lawsuits based on stale debts, such consumers would unwittingly acquiesce to such lawsuits. And, even if

the consumer realizes that she can use time as a defense, she will more than likely still give in ra ther than f ight the

lawsuit because she must still expend energy and resources and subject herself to the embarrassment of going into

court to present the defense; this is particularly true in light of the costs of attorneys today.”).

Bureau’s quantitative testing generally indicates that disclosures, in certain situations, can be

effective in curing the potential deception associated with the collection of time-barred debt.

105

The Bureau concludes that a prohibition on the collection of time-barred debt would impose

significant burden on debt collectors to identify such debts and would decrease the value of time-

barred debts to little or nothing; a debt has little or no value if the owner cannot collect the debt

either in litigation or outside of litigation. The Bureau declines to impose such extraordinarily

large costs because much less costly measures—namely, disclosures—can be effective in

preventing potential deception.

Moreover, the Bureau emphasizes that prohibiting the collection of time-barred debt

when doing so is unnecessary to prevent potential deception is inconsistent with the First

Amendment limitations on the Bureau’s authority to ban commercial speech. Courts have held

that a debt collector who asks a consumer to pay a debt is engaging in commercial speech.

106

Prohibiting the collection of time-barred debt therefore would restrict commercial speech. The

Supreme Court has held that restrictions on commercial speech are permissible when they:

(1) are supported by a substantial government interest; (2) directly advance that interest; and

(3) are no more extensive than necessary to serve that interest.

107

If the potential deception

associated with the collection of time-barred debt can be cured by a disclosure, then prohibiting

the collection of time-barred debt would impose a restriction that is more extensive than

necessary.

108

As noted above, the Bureau’s quantitative testing generally indicates that, in

certain situations involving the collection of time-barred debt, disclosures can be effective in

105

See 85 FR 12672, 12677-79 (Mar. 3, 2020).

106

See, e.g., ACA Int’l v. Healey, 457 F. Supp. 3d 17, 25-26 (D. Ma ss. 2020); Stover v. Fingerhut Direct Mktg., 709

F. Supp. 2d 473, 479 (S.D. W.Va. 2009).

107

See Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557, 566 (1980).

108

In re R.M.J., 455 U.S. 191, 203 (1982); see also Pearson v. Shalala, 164 F.3d 650 (D.C. Cir. 1999).

curing potential deception. Therefore, the Bureau declines to finalize a prohibition on the

collection of time-barred debt.

In addition to consumers and consumer advocates, several industry commenters, Federal

agency staff, and one local government commenter expressed support for the proposed

prohibitions. Commenters who supported the proposed prohibitions asserted that suits and

threats of suit on time-barred debts may induce consumers to make payments they otherwise

would not make. Some consumer advocate commenters noted that these payments can revive

the debt collector’s right to sue in certain jurisdictions. Additionally, consumer advocate

commenters asserted that consumers often assume that the mere filing of a lawsuit means that

they owe the debt, that the amount owed is accurately stated, and that the debt collector has the

legal right to collect the debt, whereas in fact the debt collector may lack support for its claims.

These commenters also asserted that consumers generally lack the knowledge and resources to

defend their rights in court, and, as a consequence, many claims result in default judgments on

debts that were not legally enforceable. Consumer advocate commenters also provided

anecdotes and pointed to recent enforcement actions to show that debt collectors continue to sue

and threaten to sue on time-barred debt.

109

One industry commenter who supported elements of

proposed § 1006.26(b) acknowledged that proposed § 1006.26(b) is consistent with long-

standing FDCPA case law.

109

See, e.g., Consent Order ¶¶ 65-69, In re Encore Capital Grp., Inc., No. 2015-CFPB-0022 (Sept. 9, 2015),

http://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf; Consent Order ¶¶ 56-59,

In re Portfolio Recovery Assocs. LLC, No. 2015-CFPB-0023 (Sept. 9, 2015),

http://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf; see also

Com plaint ¶¶ 30-35, Bureau of Consumer Fin. Prot. v. Encore Capital Grp., Inc., No. 2020CV1750 (S.D. Cal. Sept.

8, 2020), https://www.consumerfinance.gov/documents/9167/cfpb_encore-capital-group-et-al_complaint_2020-

08.pdf.

Several industry commenters who opposed proposed § 1006.26(b) argued that the Bureau

should not prohibit suits and threats of suit on time-barred debt because, in most jurisdictions,

expiration of the statute of limitations does not prohibit a debt collector from bringing suit but

rather provides the consumer with an affirmative defense to liability. According to these

commenters, proposed § 1006.26(b) would effectively preempt State affirmative defense laws by

making expiration of the statute of limitations a total bar to suit, thereby interfering with debt

collectors’ right to legal recourse under State law. Relatedly, an industry commenter argued that

State courts are capable of addressing situations in which a debt collector sues to collect a time-

barred debt, including by dismissing the debt collector’s claim and awarding sanctions if

appropriate. Another industry commenter asserted that consumers should be responsible for

tracking the legal obligations associated with their debts, and that it would be unduly

burdensome to require debt collectors to determine whether a debt is time barred, particularly for

debt collectors who are small businesses.

Some industry commenters argued that the Bureau lacks the authority to prohibit suits

and threats of suit on time-barred debts. For example, several industry commenters argued that

proposed § 1006.26(b) exceeds the Bureau’s authority because, in their view, nothing in the

FDCPA permits the Bureau to preempt State laws relating to debt collection or access to courts

or establishes a Federal role in determining State law defenses. Similarly, one industry

commenter asserted that proposed § 1006.26(b) contradicts the Federal Rules of Civil Procedure

and State-law equivalents and abridges a debt collector’s right to petition the courts. The

commenter pointed to Federal Rule of Civil Procedure 11, pursuant to which an attorney’s

claims, defenses, and other legal contentions must be warranted by existing law or by a

nonfrivolous argument for extending, modifying, or reversing existing law or for establishing

new law. According to this commenter, the proposed prohibitions conflict with Rule 11 and its

equivalents by discouraging debt collectors from filing legitimate lawsuits that argue in good

faith for the modification or reversal of existing law.

Final § 1006.26(b) prohibits a debt collector from bringing or threatening to bring a legal

action against a consumer to collect a time-barred debt. A debt collector who sues or threatens to

sue a consumer to collect a time-barred debt explicitly or implicitly misrepresents to the

consumer that the debt is legally enforceable, and that misrepresentation is material to consumers

because it may affect their conduct with regard to the collection of that debt, including whether

to pay it.

110

The Bureau’s consumer testing suggests that consumers often are uncertain about

their rights concerning time-barred debt.

111

Consumers sued or threatened with suit on a time-

barred debt generally do not recognize that the debt is time barred, that time-barred debts are

unenforceable in court, or that they must raise the expiration of the statute of limitations as an

affirmative defense.

The prohibitions in final § 1006.26(b) generally are consistent with the current state of

the law. Multiple courts have held that suits and threats of suit on time-barred debt violate the

FDCPA, reasoning that such practices violate FDCPA section 807’s prohibition on false or

misleading representations, FDCPA section 808’s prohibition on unfair practices, or both.

112

110

See, e.g., Kimber, 668 F. Supp. at 1489 (“By threatening to sue Kimber on her alleged debt . . . FFC implicit[ly]

represented that it could recover in a lawsuit, when in fact it cannot properly do so.”).

111

See FMG Focus Group Report, supra note 26, a t 9-10; FMG Cognitive Report, supra note 27, a t 36-37; FMG

Summary Report, supra note 29, a t 35-36; see also Fed. Trade Comm’n, Repairing a Broken System: Protecting

Consumers in Debt Collection Litigation and Arbitration at iii, 26 (July 2010),

https://www.ftc.gov/sites/default/files/documents/reports/federal-trade-commission-bureau-consumer-protection-

staff-repo rt-repairing-broken-system-protecting/debtcollectionreport.pdf (FTC Litiga tion Report).

112

See, e.g., Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679, 683-84 (7th Cir. 2017); McMahon v. LVNV

Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014); Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1079 (7th

Cir. 2013); Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 33 (3d Cir. 2011) (per curia m); Goins v. JBC & Assocs.,

P.C., 352 F. Supp. 2d 262, 273 (D. Conn. 2005); Kimber, 668 F. Supp. at 1487-89.

The FTC also has concluded that the FDCPA bars actual and threatened suits on time-barred

debt.

113

In addition, the prohibitions in final § 1006.26(b) generally are consistent with current

industry practice. For example, a number of industry commenters stated they do not sue or

threaten to sue on time-barred debt as a matter of policy, and one trade group commenter stated

that it requires its members to refrain from suing or threatening to sue on time-barred debts.

The Bureau recognizes that, in most jurisdictions, expiration of the statute of limitations

provides the consumer with an affirmative defense to liability, but it does not bar a debt collector

from bringing suit. The Bureau concludes, however, that consumers are unlikely to know

whether the applicable statute of limitations has expired or that the expiration of the statute of

limitations provides an affirmative defense. Suits and threats of suit on time-barred debts

therefore imply to the least sophisticated consumer not simply that the debt collector may sue or

has sued the consumer but also that the debt collector’s claim is legally enforceable. For time-

barred debts, this is misleading because expiration of the statute of limitations provides the

consumer with a complete defense.

114

Accordingly, the Bureau concludes that bringing or

threatening to bring a legal action to collect a time-barred debt is a deceptive practice under

FDCPA section 807 even if expiration of the statute of limitations is an affirmative defense

rather than a categorical bar to suit.

As explained below, the Bureau is finalizing § 1006.26(b) as an interpretation of FDCPA

section 807’s prohibition on deception; such an interpretation is squarely within the Bureau’s

authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts

113

FTC Litiga tion Report, supra note 111, a t 23.

114

See, e.g., Goins, 352 F. Supp. 2d at 272 (holding that, a lthough the statute of limitations is a n a ffirmative defense,

threatening to bring suit on time-barred debt “can at best be described as a ‘misleading’ representation, in violation

of § 1692e,” because the statute of limitations is a complete defense to a ny suit).

by debt collectors. Contrary to commenters’ claims, § 1006.26(b) does not preempt State laws

relating to when a debt collector may bring a lawsuit in State court. Rather, it provides that a

debt collector who sues or threatens to sue a consumer to collect a time-barred debt violates the

FDCPA even if applicable State law permits the suit. In addition, contrary to commenters’

assertions, § 1006.26(b) does not exceed the Bureau’s authority by regulating access to the courts

or litigation activities. Debt collectors have repeatedly argued that they cannot be held liable

under the FDCPA for actions taken in litigation because, for example, the United States

Constitution allows debt collectors to petition the courts, or because the Federal Rules of Civil

Procedure (or their State equivalents) allow debt collectors to argue for the modification or

reversal of existing law. Many courts have rejected such arguments, generally reasoning that the

FDCPA unquestionably applies to litigation activities.

115

The fact that expiration of a State’s

statute of limitations may not extinguish a debt under State law or bar a lawsuit in State court

unless an affirmative defense is raised and proven does not render the FDCPA’s prohibition on

using deceptive or misleading representations or means in debt collection inapplicable. There is

nothing unusual about the proposition that some behavior permitted by State law may

nevertheless violate Federal law. Moreover, nothing in § 1006.26(b) prohibits a debt collector

from bringing a legal action against a consumer in which the debt collector argues for an

extension, modification, or reversal of existing law or the establishment of new law—including a

legal action in which the debt collector argues that a debt is not time barred. Debt collectors

remain free to do so. But a debt collector who brings such an action may violate § 1006.26(b) if

a court ultimately determines that the debt was time barred.

115

See, e.g., Aguilar v. LVNV Funding LLC, No. 2:19-cv-105, 2019 WL 3369706, at *3-4 (M.D. Fla. July 26, 2019);

Tobing v. Parker McCay, P.A., No. 3:17-cv-00474, 2018 WL 2002799, at *9 (D.N.J. Apr. 30, 2018); Consumer Fin.

Prot. Bureau v. Frederick J. Hanna & Assocs., P.C., 114 F. Supp. 3d 1342, 1359-61 (N.D. Ga . 2015); Johnson v.

Riddle, 305 F.3d 1107, 1118 (10th Cir. 2002).

Liability Standard

Proposed § 1006.26(b) would have prohibited a debt collector from bringing or

threatening to bring a legal action against a consumer to collect a time-barred debt only if the

debt collector knew or should have known the debt was time barred.

In proposing a knows-or-should-know standard, the Bureau explained that determining

whether a debt is time barred may involve analyzing which State law applies, which statute of

limitations applies, when the statute of limitations began to run, and whether the statute of

limitations has been tolled or reset. In many cases, a debt collector will know, or will be able to

readily determine, whether the statute of limitations has expired. In some instances, however, a

debt collector may be genuinely uncertain even after undertaking a reasonable investigation,

such as if the case law in a State is unclear as to which statute of limitations applies to a

particular type of debt. The proposed knows-or-should-know standard was meant to address this

concern by not imposing liability on a debt collector if it had no way of knowing that a particular

debt was time barred. But the Bureau also acknowledged that it sometimes may be difficult to

determine whether a knows-or-should-know standard has been met. Such uncertainty could

increase litigation costs and make it difficult for consumers and government agencies to bring

actions against debt collectors. To address this concern, the Bureau sought comment on an

alternative strict liability standard pursuant to which a debt collector would be liable for suing or

threatening to sue on a time-barred debt even if the debt collector neither knew nor should have

known that the debt was time barred.

Industry commenters generally did not support a strict liability standard. These

commenters generally agreed that it can be difficult for a debt collector to determine whether a

debt is time barred and asserted that holding debt collectors strictly liable for good faith errors

would be unduly harsh. These commenters stated, for example, that determining the applicable

statute of limitations and whether it has expired may require analyzing a variety of factual and

legal questions specific to the debt, and that, in many cases, a debt collector may reach the wrong

conclusion even after undertaking a reasonable investigation and analysis. Industry commenters

asserted that debt collectors may be unable to reliably determine the statute of limitations before

filing suit because the law is unclear, because some information relevant to the analysis may be

unavailable, or both. Some industry commenters also asserted that the analysis may change over

time. For example, according to these commenters, a consumer’s decision to move to a different

State after signing a loan agreement could affect a debt collector’s analysis of which State law

applies and whether the statute of limitations has been tolled. As another example, an industry

commenter stated that, in certain jurisdictions, the statute of limitations applicable to mortgage

debt is in flux because of unprecedented access by consumers to loss mitigation and an increase

in bankruptcy filings in the wake of the foreclosure crisis. Several industry commenters also

expressed concern that debt collectors who are not attorneys may have particular difficulty

making an accurate time-barred debt determination. For these reasons, industry commenters

asserted that a strict liability standard, which would leave no room for error, would expose debt

collectors to liability even though it would be challenging or very costly in many circumstances

to determine if a debt is time barred.

Some industry commenters supported the proposed knows-or-should-know standard.

These commenters generally asserted that the proposed standard would help debt collectors

avoid liability for good-faith mistakes in determining whether a debt is time barred—something

industry commenters argued is important given the complexity and uncertainty of certain time-

barred debt analyses. One industry commenter asserted that the proposed standard also would

adequately protect consumers from harm. However, several industry commenters who expressed

general support for the proposed standard also asked the Bureau to provide additional guidance,

including examples of circumstances in which a debt collector neither knows nor should know

that a debt is time barred.

Not all industry commenters supported the proposed knows-or-should-know standard.

Some industry commenters argued that the proposed standard was vague and subjective and

could increase litigation risk rather than mitigating it. Other industry commenters asked the

Bureau to clarify that the knows-or-should-know standard depends on the specific understanding

and sophistication of the particular debt collector. They asserted, for example, that what an

attorney debt collector knows or should know about a debt’s time-barred status may differ from

what a non-attorney debt collector knows or should know.

Some industry commenters who opposed the proposed knows-or-should-know standard

offered alternative standards. For example, several industry commenters recommended that the

Bureau finalize a reasonable investigation standard such that a debt collector who sued or

threatened to sue to collect a time-barred debt would not be liable if the debt collector undertook

a reasonable investigation before doing so. Similarly, some industry commenters argued that a

debt collector who acts in good faith should not be liable for suits and threats of suit on time-

barred debts. Other industry commenters suggested that the Bureau finalize a liability standard

akin to qualified immunity such that a debt collector who sued or threatened to sue to collect a

time-barred debt would not be liable unless the applicable statute of limitations was clearly

established. Other industry commenters suggested that the Bureau finalize an actual knowledge

standard such that a debt collector who sued or threatened to sue on a time-barred debt would be

liable only if the debt collector knew the debt was time barred.

Some commenters suggested that the Bureau finalize various safe harbors for debt

collectors. For example, industry commenters recommended safe harbors for debt collectors

collecting debts of a certain age and for debt collectors who rely on information provided by the

creditor. Other industry commenters suggested that a debt collector who maintains and follows

reasonable procedures for determining whether a debt is time barred should receive a safe harbor

from liability in the event that the debt collector inadvertently sues or threatens to sue on a time-

barred debt. One industry commenter requested that the Bureau specifically confirm that

FDCPA section 813(c)’s bona fide error defense would apply to violations of § 1006.26(b).

Other commenters, including consumers, consumer advocates, academics, some members

of Congress, a group of State Attorneys General, and several local governments, urged the

Bureau to adopt a strict liability standard. Although some of these commenters acknowledged

that determining whether a debt is time barred can be complicated,

116

others argued that

determining whether a debt is time barred is relatively straightforward in most cases. One

commenter suggested that, if the Bureau finalizes the proposed knows-or-should-know standard,

the Bureau should clarify that in most cases a debt collector will know (or should know) whether

the statute of limitations has run because in most cases debt collectors have the necessary

information to make the determination.

Some consumer advocate commenters who argued for a strict liability standard stated that

it would incentivize debt collectors to determine whether a debt is time barred before threatening

or filing suit. Some consumer advocate commenters suggested that this would help reduce the

116

A group of academic commenters challenged the Bureau’s assertion that debt buyers generally receive enough

inf orm ation to determine whether a debt is time barred. These commenters noted that fewer than half of respondents

to the Bureau’s industry survey reported receiving a ccount a greement documentation or billing sta tements,

inf orm ation that the commenters believed would help a debt collector calculate the a pplicable statute of lim itations

and whether it has expired.

consumer protection risks associated with the collection of time-barred debt, including the risk

that consumers may be unable to adequately protect their rights in court and the risk that

consumers may make a payment on the debt under the misimpression that the debt is legally

enforceable, which could revive the debt collector’s right to sue. Some commenters expressed

concern that the proposed knows-or-should-know standard would not adequately incentivize debt

collectors to determine the time-barred status of debts. Around two dozen members of Congress

asserted that finalizing a knows-or-should-know standard without additional protections could

encourage willful ignorance on the part of a debt collector about the time-barred status of a debt.

A group of State Attorneys General and some consumer advocate commenters similarly argued

that a knows-or-should-know standard would promote willful ignorance by debt collectors.

A number of commenters, including consumer advocate commenters and a group of State

Attorneys General, advocated a strict liability standard because, in their view, debt collectors

generally have more resources and expertise and better access to information than consumers.

These commenters generally asserted that it would often be difficult for a consumer to establish

that a debt was time barred and that the debt collector knew or should have known that fact.

Many of these commenters also argued that the proposed knows-or-should-know

standard was inconsistent with the FDCPA (which some commenters described as a strict

liability statute) and with FDCPA section 807’s prohibition on deception (which does not include

a knowledge element). Some commenters pointed out that, because FDCPA section 813(c)

provides debt collectors with a bona fide error defense to liability in certain circumstances, a

strict liability standard would not expose debt collectors to undue liability. Commenters also

argued that the proposed knows-or-should-know standard was inconsistent with case law

imposing or implying a strict liability standard when evaluating claims that a debt collector sued

or threatened to sue to collect a time-barred debt. Several commenters agreed with the Bureau

that a strict liability standard generally would reduce ambiguity and be easier to enforce than the

proposed knows-or-should-know standard. Federal government agency staff encouraged the

Bureau to consider further whether a knows-or-should-know standard would place an

unnecessary burden on law enforcement agencies.

The Bureau is not finalizing the proposed knows-or-should-know standard and is instead

finalizing a strict liability standard. Although determining whether a debt is time barred can be

challenging or costly in certain circumstances, the Bureau concludes that the proposed knows-or-

should-know standard is generally inconsistent with FDCPA section 807, which does not include

an exception or exclusion for debt collectors whose deceptive statements are unintentional or for

whom ensuring that a statement is not deceptive is burdensome.

117

The Bureau also concludes

that a strict liability standard is more consistent with FDCPA section 807’s prohibition on

deception, as well as case law imposing or implying such a standard when evaluating claims

under FDCPA section 807 generally and claims related to suits and threats of suit on time-barred

debt specifically.

118

Moreover, the Bureau notes that a knows-or-should-know standard could, in some

circumstances, shift the risk that a claim is deceptive from debt collectors to consumers. As

explained above, suits and threats of suit on time-barred debt can cause consumer harm. In a

case in which it is difficult or costly to determine whether a debt is time barred, a knows-or-

117

For the same reasons, the Bureau concludes that the alternative standards proposed by industry commenters—

including, for example, an actual knowledge standard, a reasonable-investiga tion standard, or a clearly-established-

law standard—are generally inconsistent with FDCPA section 807.

118

See, e.g., Pantoja, v. Portfolio Recovery Assocs., LLC, 852 F.3d 679, 683 (7th Cir. 2017); Buchanan v. Northland

Grp., Inc., 776 F.3d 393, 399 (6th Cir. 2015); Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1083-84 (7th Cir.

2013); Clark v. Capital Credit & Collection Servs., 460 F.3d 1162, 1176 (9th Cir. 2006); Gearing v. Check

Brokerage Corp., 233 F.3d 469, 472 (7th Cir. 2000).

should-know standard could allow debt collectors to avoid liability for causing such harm. In

other consumer protection contexts, courts and the FTC have recognized that an advertiser who

makes an unsubstantiated claim may be liable for deception even if the cost of substantiating the

claim is high or prohibitively expensive.

119

The Bureau’s decision to finalize a strict liability

standard is generally consistent with this principle.

The Bureau emphasizes that, although a strict liability standard might create some risk for

debt collectors if a debt’s time-barred status is unclear, debt collectors have multiple ways to

manage such risk. In particular, a debt collector can avoid liability under § 1006.26(b) by

confirming that the statute of limitations has not expired before bringing or threatening to bring a

legal action. Similarly, a debt collector who is ultimately unable to determine with certainty

whether a debt is time barred can avoid liability under § 1006.26(b) by refraining from bringing

or threatening to bring a legal action while, in most States, continuing with non-litigation

collection activities. Moreover, a debt collector who brings or threatens to bring a legal action

against a consumer to collect a time-barred debt may, depending upon the reason for the debt

collector’s error, have a defense to civil liability under FDCPA section 813 if the debt collector

shows by a preponderance of evidence that the violation was not intentional and resulted from a

bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any

119

See, e.g., POM Wonderful, LLC v. FTC, 777 F.3d 478, 497 (D.C. Cir. 2015) (“We acknowledge that RCTs [i.e.,

ra ndomized clinical tria ls] m a y be costly . . . . Yet if the cost of an RCT proves prohibitive, petitioners can choose

to specify a lower level of substantiation for their cla ims. As the Commission observed, the need for RCTs is driven

by the claims petitioners have chosen to make.”) (internal bra ckets a nd quotation marks omitted); In re POM

Wonderful LLC, 2013 WL 268926, at *50 (F.T.C. Ja n. 16, 2013) (rejecting a rgument that an advertiser may “make

pa rticular cla ims that go beyond the substantiation it possesses a nd then ask the Commission to excuse the

inadequacy of its support by asserting that [the] advertiser did the best it could because the proper substantiation for

the actual claim would be too expensive”); In re Kroger Co., 98 F.T.C. 639, 737 (1981) (“Where the demands of the

purse require such compromises, the advertiser must generally limit the claims it makes for its data or make

appropriate disclosures to insure proper consumer understanding of the survey’s results.”).

such error.

120

For these reasons, the Bureau concludes that finalizing a strict liability standard

under § 1006.26(b) does not pose an undue risk of liability for debt collectors, even in cases in

which a debt collector is unable to determine with certainty whether a debt is time barred.

Requests for Clarification

Several commenters asked the Bureau to clarify the scope of proposed § 1006.26(b)’s

prohibitions.

121

Two industry commenters suggested that the term “legal action” is unclear and

could be interpreted to encompass any action in any court of law or equity. These commenters

suggested replacing “legal action” with “lawsuit,” asserting that, although “legal action” and

“lawsuit” have overlapping meanings, “lawsuit” has a narrower connotation that excludes certain

legal actions, such as bankruptcy proceedings. Alternatively, these commenters argued that, if

the Bureau declines to change the term legal action, the prohibitions in proposed § 1006.26(b)

should be adjusted to specifically exclude certain types of legal actions, such as garnishment

actions, probate actions, and the filing of proofs of claim in bankruptcy proceedings.

122

Another

commenter asked the Bureau to clarify that, for purposes of proposed § 1006.26(b), the term

“legal action” does not include “non-original complaints,” such as amended complaints,

supplemental complaints, complaints re-filed after a prior dismissal without prejudice, post-

judgment court filings, or post-judgment communications (such as executions or garnishments).

120

See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573 (2010) (holding that bona fide error

def ense is not a vaila ble when FDCPA viola tion a rises f rom a debt collector’s m istaken interpretation of FDCPA’s

lega l requirements but noting that bona fide error defense is a vaila ble when FDCPA viola tion a rises from certain

other types of errors).

121

Com menters a lso a sked the Bureau to a dopt a number of interventions that th e Bureau did not propose, such as a

prohibition on revival a nd a prohibition on perpetual tolling, which commenters asserted prevents a statute of

limita tions from ever expiring in certa in circumstances. The Bureau did not propose these interventions and it is not

fina lizing them.

122

A consumer advocate commenter argued that the rule should expressly prohibit filing a ba nkruptcy proof of

claim to recover a time-barred debt.

Final § 1006.26(b) uses the term “legal action.” In Midland Funding, LLC v. Johnson,

the Supreme Court held that filing a proof of claim on a time-barred debt in a bankruptcy

proceeding does not violate the FDCPA sections 807 or 808.

123

Consistent with Midland, the

final rule clarifies that § 1006.26(b) does not prohibit the filing of proofs of claim in a

bankruptcy proceeding. The Bureau does not see a basis to categorically exclude other types of

legal actions, such as garnishment and probate actions, from the prohibitions in § 1006.26(b).

No other section of the FDCPA pertaining to legal actions contains a similar exclusion, and the

commenters did not explain why they believe an exclusion is merited here.

At least one industry commenter asked the Bureau to clarify the types of actions and

statements that qualify as a threat of legal action or that could be interpreted by a consumer as a

threat of legal action. The Bureau declines to do so at this time. Whether a particular action or

statement constitutes a threat of legal action depends on the facts and circumstances of the

particular case. Nevertheless, the Bureau notes that § 1006.26(b) prohibits not only explicit

threats of legal action but also implicit ones.

For the reasons discussed above, the Bureau is finalizing § 1006.26(b), which provides

that a debt collector must not bring or threaten to bring a legal action against a consumer to

collect a time-barred debt. Section 1006.26(b) also states that these prohibitions do not apply to

proofs of claim filed in connection with a bankruptcy proceeding. The Bureau is finalizing

§ 1006.26(b) as an interpretation of FDCPA section 807. FDCPA section 807 generally

prohibits debt collectors from using “any false, deceptive, or misleading representation or means

in connection with the collection of any debt,” and FDCPA section 807(2)(A) specifically

prohibits falsely representing “the character, amount, or legal status of any debt.” The Bureau

123

137 S. Ct. 1407 (2017).

interprets FDCPA section 807 and 807(2)(A) to prohibit debt collectors from suing or

threatening to sue consumers on time-barred debts because such suits and threats of suit

explicitly or implicitly misrepresent, and cause consumers to believe, that the debts are legally

enforceable. In addition, threats to sue consumers on time-barred debts are similar to threats to

take actions that cannot legally be taken, which FDCPA section 807(5) specifically prohibits,

because both involve the threat of action to which the consumer has a complete legal defense.

124

The Bureau’s interpretation of FDCPA section 807 is generally consistent with well-established

case law holding that suits and threats of suits on time-barred debt violate FDCPA section

807.

125

Proposed Provision Not Finalized

In the February 2020 proposal, the Bureau proposed to require a debt collector collecting

a debt that the debt collector knows or should know is a time-barred debt to provide time-barred

debt disclosures and, if applicable, revival disclosures (proposed § 1006.26(c)(1) and (2)).

126

The Bureau proposed to require these disclosures in the debt collector’s initial communication

with the consumer, on any validation notice, and in certain situations if the debt became time

barred during collections. The February 2020 proposal also included, among other things, model

forms and language a debt collector could have used to comply with the proposed disclosure

124

A consumer a dvocate commenter requested that the Bureau clarify that a debt collector who brings or threatens to

bring a lega l a ction against a consumer to collect a tim e-barred debt a lso violates the Dodd-Frank Act. The Bureau

is fina lizing § 1006.26(b) as an interpretation of FDCPA section 807 only.

125

See, e.g., Pantoja, 852 F.3d a t 683; McMahon, 744 F.3d at 1020; Phillips, 736 F.3d at 1079; Kimber, 668 F.

Supp. at 1488-89.

126

Specifica lly, proposed § 1006.26(c)(1) would have required a debt collector collecting a debt that the debt

collector knows or should know is a time-barred debt to disclose (i) that the law limits how long a consumer can be

sued for a debt and that, because of the age of the debt, the debt collector will not sue the consumer to collect it; and

(ii) if, under applicable law, the debt collector’s right to bring a legal action against the consumer can be revived,

then the fact that revival can occur and the circumstances in which it can occur. 85 FR 12672, 12696 (Mar. 3,

2020).

requirements (proposed Model Forms B–4 through B–7), and it provided a safe harbor to a debt

collector who used the model forms or language (proposed § 1006.26(c)(3)). In support of

proposed § 1006.26(c), the Bureau cited, among other things, the results of its quantitative

testing survey.

127

Although some commenters expressed general support for the idea of addressing the risk

of deception associated with the collection of time-barred debts by requiring time-barred debt

and revival disclosures, many commenters opposed the Bureau’s specific proposal. According to

industry commenters, the proposal would have imposed a significant burden on debt collectors

by requiring them to conduct time-barred debt and revival analyses for each debt in collection.

These commenters also reported that they would face a significant risk of liability given

uncertainty about the statute of limitations and revival law in at least some States. Industry

commenters stated that most debt collectors lack the legal training to determine whether a debt is

time barred or the circumstances in which it can be revived. To comply with the disclosure

requirements, these commenters asserted that debt collectors would need to engage an attorney

or otherwise incur substantial costs. Industry commenters particularly objected to imposing

these costs on debt collectors who never sue to collect debts, or never sue to collect revived

debts. Industry commenters also raised concerns about being required to respond to legal

questions from consumers as a result of providing the disclosures.

Among consumer, consumer advocate, academic, and State Attorneys General

commenters who opposed the Bureau’s proposal, many doubted that disclosures can effectively

convey information about topics as complicated and unfamiliar to consumers as time-barred debt

and revival. These commenters also raised concerns about the Bureau’s proposed model

127

See id. at 12678-79.

disclosures, characterizing them as confusing, vague, and ineffective—particularly for the least

sophisticated consumer.

128

Some consumer advocate commenters also expressed concern about

the accuracy of the proposed disclosures and the frequency with which the Bureau proposed to

require them. These commenters urged the Bureau to reconsider or significantly revise the

proposal.

Given industry commenters’ concerns about the burden on debt collectors of the Bureau’s

specific proposal, and consumer advocate commenters’ concerns about whether the Bureau’s

specific proposal would effectively cure consumer deception, the Bureau has decided not to

finalize proposed § 1006.26(c). In deciding not to finalize proposed § 1006.26(c), the Bureau

determines only that the specific disclosure requirements described in the February 2020

proposal may not sufficiently accommodate the concerns raised by different stakeholders.

However, the Bureau concludes, as discussed in the February 2020 proposal, that, in many

circumstances, disclosures can effectively cure the potential deception associated with the

collection of time-barred debt.

Finally, the Bureau emphasizes that the FDCPA, the November 2020 Final Rule, and this

final rule nevertheless apply to debt collectors’ activities involving the collection of time-barred

debts, including debt collectors’ communications when collecting such debts. Accordingly, a

debt collector may not use any false, deceptive, or misleading representation or means in

128

Courts have applied a n objective standard of a n “unsophisticated” or “lea st sophisticated” consumer to cla ims

brought under FDCPA section 807. Jensen v. Pressler & Pressler, 791 F.3d 413, 419 (3d Cir. 2015) (“The standard

is an objective one, meaning that the specific plaintiff need not prove that she was actually confused or misled, only

that the objective least sophisticated debtor would be.”); Hartman v. Great Seneca Fin. Corp., 569 F.3d 606, 613

(6th Cir. 2009) (a pplying lea st sophisticated consumer standard to section 807 claim); Bentley v. Great Lakes

Collection Bureau, 6 F.3d 60, 62 (2d Cir. 1993) (same); Swanson v. S. Or. Credit Serv., Inc., 869 F.2d 1222, 1227

(9th Cir. 1988) (per curiam) (same). This standard “protects the consumer who is uninformed, naive, or trusting, yet

it a dm its an objective element of reasonableness.” Gammon v. GC Servs. Ltd. P’ship, 27 F.3d 1254, 1257 (7th Cir.

1994). As discussed in part IV, the Bureau interprets FDCPA sections 807 to incorporate an objective,

“unsophisticated” or “least sophisticated” consumer standard.

connection with the collection of a time-barred debt. Nor may a debt collector use unfair or

unconscionable means to collect or attempt to collect a time-barred debt. Depending on the

circumstances associated with the collection of a specific time-barred debt, a debt collector may

decide that, to avoid violating the FDCPA and the final rule, the debt collector needs to disclose

information to consumers about the debt collector’s ability to sue and the possibility of revival

and, in that case, the debt collector may do so.

Section 1006.30 Other Prohibited Practices

30(a) Required Actions Prior to Furnishing Information

The Bureau proposed in § 1006.30(a) to prohibit so-called passive collections, i.e., the

practice of a debt collector furnishing to a consumer reporting agency, as defined in section

603(f) of the Fair Credit Reporting Act (FCRA),

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information regarding a debt before

communicating with the consumer about the debt. The Bureau proposed § 1006.30(a) pursuant

to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of

debts by debt collectors; pursuant to its authority to interpret FDCPA section 806, which

prohibits a debt collector from engaging in any conduct the natural consequence of which is to

harass, oppress, or abuse any person in connection with the collection of a debt; and pursuant to

its authority to interpret FDCPA section 808, which prohibits a debt collector from using unfair

or unconscionable means to collect or attempt to collect any debt. Courts have interpreted

FDCPA sections 806 and 808 to prohibit certain coercive collection methods that may cause

consumers to pay debts not actually owed.

130

129

15 U.S.C. 1681a(f).

130

See, e.g., Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1517 (9th Cir. 1994) (reversing grant of summary

judgment to debt collector in part because “a jury could rationally find” that filing writ of garnishment was unfair or

unconscionable under section 808 when debt was not delinquent); Ferrell v. Midland Funding, LLC, No. 2:15-cv-

For the reasons discussed below, the Bureau is: (1) finalizing § 1006.30(a) as

§ 1006.30(a)(1), with changes to specify the required actions that a debt collector generally must

take before furnishing information to a consumer reporting agency; and (2) finalizing in

§ 1006.30(a)(2) a special rule for information furnished to certain specialty consumer reporting

agencies.

30(a)(1) In General

The Bureau received comments on proposed § 1006.30(a) from consumer advocates and

individuals, nonprofits, industry commenters, and government agencies. Many commenters

supported the proposed prohibition on passive collections. A consumer group emphasized the

consumer harms identified in the proposal and agreed that, because with passive collections a

consumer does not know a debt is in collection, the practice can cause a consumer’s credit score

to decrease, increase the cost of future credit for the consumer, make it more difficult for a

consumer to obtain affordable housing, and jeopardize some job opportunities, all without the

consumer’s knowledge. Three government commenters also supported the proposed prohibition;

one of them reported receiving consumer complaints regarding passive collections. An industry

commenter supporting the proposal noted that the commenter provides consumers with a 90-day

grace period before furnishing information to consumer reporting agencies.

A number of comments, primarily from industry or industry trade groups, opposed the

prohibition or suggested changes or clarifications. Two industry trade groups and a law firm

commenter argued that proposed § 1006.30(a) should not be finalized because it conflicts with

00126-JHE, 2015 WL 2450615, at *3-4 (N.D. Ala. May 22, 2015) (denying debt collector's motion to dismiss

section 806 cla im where debt collector a llegedly initia ted collection la wsuit even though it knew plaintiff did not

owe debt); Pittman v. J.J. Mac Intyre Co. of Nev., Inc., 969 F. Supp. 609, 612-13 (D. Nev. 1997) (denying debt

collector's motion to dismiss claims under sections 807 and 808 where debt collector allegedly attempted to collect

fully sa tisfied debt).

the FCRA, including section 623(a)(7), which requires certain financial institutions to provide

written notice to customers if they furnish negative information to a consumer reporting agency,

and section 623(a)(5), which requires furnishers to provide certain information about a reported

delinquency to the consumer reporting agency no later than 90 days after furnishing

information.

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Other industry commenters argued that the proposal would encourage consumers

to ignore communications, provide inaccurate forwarding information to the creditor, or falsely

mark mail as undeliverable to avoid having collection items furnished to consumer reporting

agencies. In addition, several industry commenters stated that locating consumers for certain

debts, such as medical debt, telecommunications debt, or rental debt, is costly and may not be

justified for small amounts. If debt collectors cannot passively collect these debts, the

commenters argued, then the debts are effectively uncollectible. One industry trade group

similarly argued that passive collections benefits consumers who otherwise cannot be located,

rather than harming them, because the collection item on their credit report will provide them

contact information for the debt collector, which the consumer can then use to make payment

arrangements.

A number of commenters suggested changing or clarifying the proposed requirement to

“communicate” before furnishing information to a consumer reporting agency. Some urged the

Bureau to adopt a stricter requirement, such as by requiring written notice to the consumer before

reporting, mandating specific disclosure language, imposing across-the-board waiting periods

before reporting, or prohibiting indirect communications. Others expressed concern that the

proposal would impose more stringent communication requirements than the FDCPA otherwise

requires and asked the Bureau to relax the proposal, such as by clarifying that proof of receipt of

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15 U.S.C. 1681s-2(a)(5) and (7).

a communication is not required, by allowing debt collectors to satisfy the proposed requirement

by leaving limited-content messages (as defined in § 1006.2(j) of the November 2020 Final

Rule), or by permitting debt collectors to presume receipt of a communication after a waiting

period expires.

After considering all of the comments, the Bureau is finalizing proposed § 1006.30(a)

and its related commentary with substantial revisions, as follows.

Subject to § 1006.30(a)(2) (discussed below), final § 1006.30(a)(1) requires a debt

collector to take certain actions before furnishing information about a debt to a consumer

reporting agency, as defined in section 603(f) of the FCRA. Specifically, the debt collector must

either: (1) speak to the consumer about the debt in person or by telephone, or (2) place a letter in

the mail or send an electronic message to the consumer about the debt and wait a reasonable

period of time to receive a notice of undeliverability. During the reasonable period, the debt

collector must permit receipt of, and monitor for, notifications of undeliverability from

communications providers. If the debt collector receives such a notification during the

reasonable period, the debt collector must not furnish information about the debt to a consumer

reporting agency until the debt collector otherwise satisfies § 1006.30(a)(1). The Bureau is

finalizing commentary to clarify these requirements as discussed below.

The Bureau finalizes the requirements under § 1006.30(a)(1) to address consumer harms

that may arise if a debt collector furnishes information about a debt to a consumer reporting

agency without first informing the consumer about the debt. As discussed in the proposal,

consumers who have not been informed about the debt are likely to be unaware that they have a

debt in collection unless they obtain and review their consumer report. In turn, many consumers

may not obtain their consumer reports until they apply for credit, housing, employment, or

another product or service provided by an entity that reviews consumer reports during the

application process. At that point, consumers may feel pressure to pay debts that they otherwise

would dispute, including debts they do not owe, or may face the denial of an application, a

higher interest rate, or other negative consequences.

In addition, as discussed in the proposal, debt collectors may attempt to collect debts

passively if the expected return from that technique exceeds the cost of attempting to collect the

debt by communicating with consumers.

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The Bureau understands that imposing a

requirement intended to inform the consumer about a debt before f urnishing information about a

debt to consumer reporting agencies will increase costs for debt collectors who do not currently

attempt to do so. However, passive collection practices can harm consumers for the reasons

discussed above. The Bureau has determined that the final rule best balances debt collectors’

cost concerns with protections for consumers against the harms imposed by passive collection

practices. Final § 1006.30(a)(1) gives a debt collector flexibility to contact consumers in a

variety of ways, including in person, by telephone, by mail, or by electronic message.

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This

gives debt collectors flexibility to contact the consumer in a manner that works best for their

operations, and debt collectors need not confirm receipt of mail or electronic messages.

Although proposed § 1006.30(a) used the term “communicate,” the proposal did not

clearly specify a debt collector’s obligations if the debt collector learned after furnishing

information to a consumer reporting agency that no communication actually occurred (because,

e.g., the communication was sent by mail to the consumer’s current address but the debt collector

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84 FR 23274, 23330 (May 21, 2019).

133

Because medical offices, telecommunications companies, and rental offices typically have contact information

for their customers, a nd because a variety of options to verify a nd forward mail to a consumer’s new address exist, a

debt collector of such debts should be able to satisfy § 1006.30(a)’s requirements without incurring significant costs.

later received a notification that the letter was not delivered). Some commenters raised concerns

that the proposal’s use of the term “communicate” could be construed to require debt collectors

to confirm a consumer’s receipt of the information before furnishing information about a debt to

a consumer reporting agency.

To respond to such comments, and because the proposal was designed to increase the

likelihood that consumers would learn that a debt attributed to them is in collection but was not

intended to be a broader limitation on furnishing valid information about debts to consumer

reporting agencies, the Bureau finalizes specific requirements a debt collector must take before

furnishing. The actions specified in the final rule are ones that increase the likelihood that a

consumer will learn about a debt before a debt collector begins furnishing information about that

debt to a consumer reporting agency. For this reason, after a debt collector has complied with

§ 1006.30(a)(1) and furnished information to a consumer reporting agency, the debt collector

may furnish additional information with respect to that debt without having to repeat the actions

specified in § 1006.30(a)(1). Accordingly, the Bureau does not incorporate a receipt requirement

in final § 1006.30(a)(1) and, instead of using the term “communicate,” sets forth the specific

actions that a debt collector must take before furnishing.

The Bureau has also determined that final § 1006.30(a)(1) does not conflict with FCRA

section 623(a)(7) or (5) because those provisions have different requirements and goals than

§ 1006.30(a)(1). FCRA section 623(a)(7) applies only to “financial institutions” as defined in

FCRA section 603(t), which will cover few, if any, FDCPA debt collectors. Final

§ 1006.30(a)(1) does not prevent debt collectors from complying with the FCRA, and the FCRA

does not prevent debt collectors from complying with final § 1006.30(a)(1).

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The FCRA also

does not state that it is the exclusive Federal law governing credit reporting and, indeed, the

FDCPA also references a debt collector’s interactions with consumer reporting agencies.

135

Because final § 1006.30(a)(1) clearly describes the specific actions that a debt collector

must take before furnishing information about a debt to a consumer reporting agency, a debt

collector may ensure compliance with the final rule based on the debt collector’s own actions,

such as by placing a letter about the debt in the mail to the consumer and waiting a reasonable

period of time to receive a notice of undeliverability. Therefore, the final rule also resolves

concerns about consumers avoiding a debt collector’s communications to prevent the debt

collector from furnishing information to a consumer reporting agency.

The final rule specifies in § 1006.30(a)(1)(i) and (ii) the methods by which a debt

collector may meet its obligation to take certain actions before furnishing information about a

debt to a consumer reporting agency. All of the methods require that information “about the

debt” be conveyed to the consumer. Although the final rule does not specify the particular

information required to meet the “about the debt” requirement, the final rule adds comment

30(a)(1)–1 to clarify that the validation information required by § 1006.34(c), including such

information if provided in a validation notice, is information “about the debt.”

Under § 1006.30(a)(1), information about a debt must be transmitted “to the consumer”

as defined in § 1006.2(e). A debt collector who sends information about the debt that reaches a

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For example, FCRA section 623(a)(7) requires certain f inancial institutions that furnish negative information to a

consumer reporting agency, as defined in FCRA section 603(p), to provide a written notice to consumers prior to, or

no later than 30 days after, furnishing the negative information. A fina ncial institution that is required to provide a

written notice under FCRA section 623(a)(7) a nd that is a lso a cting a s an FDCPA debt collector could comply with

both requirements by, for example, pla cing a letter in the m ail to the consumer that contains sufficient inf ormation to

satisfy both requirements before furnishing information to a consumer reporting a gency.

135

See, e.g., 15 U.S.C. 1692c(b), 1692d(3).

“consumer” as defined in § 1006.6(a), which includes additional persons,

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may not have

communicated with the consumer as defined in § 1006.2(e).

The Bureau notes that, in taking any of the actions specified in § 1006.30(a)(1), a debt

collector must comply with the FDCPA and the November 2020 Final Rule, including the

prohibition on communicating, in connection with the collection of any debt, with a third

party.

137

Proposed comment 30(a)–1 provided clarifications regarding the term “communicate” in

proposed § 1006.30(a)(1). Because final § 1006.30(a)(1) does not use the term “communicate”

and instead states the specific actions the debt collector must take before furnishing information

about a debt to a consumer reporting agency, proposed comment 30(a)–1 is no longer necessary

and the Bureau is not finalizing it.

The final rule specifies in § 1006.30(a)(1)(ii) that a debt collector who places a letter in

the mail or sends an electronic message to the consumer about the debt to satisfy § 1006.30(a)(1)

must wait a reasonable period of time to receive a notice of undeliverability before furnishing

information about a debt to a consumer reporting agency. New comment 30(a)(1)–2 clarifies

that the reasonable period of time begins on the date that the debt collector places the letter in the

mail or sends the electronic message. Comment 30(a)(1)–2 also provides a safe harbor for

waiting a reasonable period of time by clarifying that a period of 14 consecutive days after the

date that the debt collector places a letter in the mail or sends an electronic message is a

reasonable period of time.

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For purposes of § 1006.6(a), the term “consumer” also includes the consumer’s spouse, parent (if the consumer is

a minor), lega l gua rdian, executor or administrator of the consumer’s estate, if the consumer is deceased, and a

confirmed successor in interest. See 85 FR 76734, 76889 (Nov. 30, 2020).

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A debt collector sending an email or text message who uses the procedures provided for in § 1006.6(d)(4) or (5)

as finalized in the November 2020 Final Rule does not violate the prohibition on third-party disclosure under

§ 1006.6(d)(1).

Comment 30(a)(1)–3 clarifies that a debt collector who places a letter in the mail or sends

an electronic message to the consumer about the debt to satisfy § 1006.30(a)(1) and does not

receive a notice of undeliverability during the reasonable period of time, and who thereafter

furnishes information about the debt to a consumer reporting agency, does not violate

§ 1006.30(a)(1) even if the debt collector subsequently receives a notice of undeliverability.

Comment 30(a)(1)–3 also provides three examples illustrating this requirement.

The Bureau determines that these provisions clarify the proposal with respect to pre-

furnishing outreach by mail or electronic message and provide protection for consumers.

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The

Bureau understands that the U.S. Postal Service typically notifies senders of most undeliverable-

as-addressed mail within 14 days. The amount of time it takes a communications provider to

return a notice of undeliverability with respect to electronic messages is less clear. While an

undeliverability notice is typically received soon after sending an electronic message, the Bureau

understands that the time for receiving a notice of undeliverability with respect to such electronic

messages may vary by provider, and the Bureau does not have sufficient information to

determine a uniform time period for electronic messages. Nevertheless, the Bureau has no

reason to believe that notices of undeliverability are typically received more than 14 days after

an electronic message is sent. Therefore, the Bureau is finalizing the same safe harbor time

period (i.e., 14 consecutive days) for electronic messages as for mailed letters.

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The Bureau

may consider revising the safe harbor for electronic messages in the future based on actual

stakeholder experience with this provision.

138

The Bureau does not impose a sim ila r period when a debt collector speaks to a consumer about the debt in person

or by telephone because these scenarios do not have the potential for an equivalent undeliverable notice outcome.

139

The Bureau notes that the 14-consecutive-day period is a safe harbor. To comply with the rule, a debt collector

only needs to wait a “reasonable period of time” to receive a notice of undeliverability. Therefore, a debt collector

who shows that the debt collector waited a reasonable time period to receive notices of undeliverability for

electronic messages may be able to satisfy the requirements of the final rule without waiting 14 days.

The Bureau recognizes that the final rule may result in instances in which debt collectors

furnish information about a debt to a consumer reporting agency even though the consumer has

not been made aware of the collection item, either because the mail or electronic message is

returned as undeliverable after the reasonable period has passed or is not received but is also not

returned. These consumers will not have the same opportunity to receive a message about their

debt as those consumers for whom the mail or electronic message is delivered. Nevertheless, the

Bureau determines that establishing a requirement that debt collectors wait a reasonable period

of time after placing a letter in the mail or sending an electronic message provides sufficient

consumer protection without unduly prohibiting a debt collector from furnishing information

about a valid debt to a consumer reporting agency.

The Bureau declines commenters’ other suggestions, such as those to require

communications in writing, dictate specific language, apply longer waiting periods (e.g., 180

days), or establish other safe harbors because the suggestions are unnecessary to achieve the

purpose of the passive collections ban. For example, requiring written communications and

specific disclosure language is unnecessary to put the consumer on notice that a debt is in

collections. Additional safe harbors are unnecessary and unwarranted at this time because the

final rule clarifies the specific actions that must occur before furnishing information to a

consumer reporting agency.

30(a)(2) Special Rule—Information Furnished to Certain Specialty Consumer Reporting

Agencies

The Bureau did not propose a special rule regarding furnishing to specialty consumer

reporting agencies. An industry commenter and a consumer reporting agency argued in a joint

comment that the final rule should exempt from § 1006.30(a) information furnished to certain

nationwide specialty consumer reporting agencies described in FCRA section 603(x)(3), i.e.,

consumer reporting agencies that maintain and compile files on consumers on a nationwide basis

relating to check writing history (“check verification consumer reporting agencies”).

The commenters explained that merchants use check verification consumer reporting

agencies to determine whether they should accept a particular check. When a merchant seeks

check verification information, the check verification consumer reporting agency issues a check

verification report with a code that will indicate if the check appears acceptable, the check is

potentially fraudulent, or the checking account is likely overdrawn. These inquiries are usually

completed in real time, while a transaction is occurring in a checkout lane or in remote retailing.

The commenters expressed concern that proposed § 1006.30(a) would degrade the timely content

of check verification reports issued by check verification consumer reporting agencies because

debt collectors would be required to delay or refrain from reporting altogether, which would

undermine the accuracy of check verification reports and reduce the willingness of merchants to

accept checks.

The commenters argued that the current system benefits consumers by alerting them to

potential fraud or that their account may be overdrawn. Requiring contact before furnishing

information would harm these consumers because the fraud or overdrawn status of the account

may never be detected and, thus, consumers may not be alerted to potential fraud or may

unknowingly continue writing checks on an overdrawn account. Further, the commenters stated

that these requirements could harm consumers by decreasing the number of merchants that

accept checks or increasing prices at merchants who continue to accept checks.

The commenters also expressly recognized the harm that can occur if a debt unexpectedly

appears on a credit-related consumer reporting agency report if the consumer is applying for

credit, a job, or rental housing, and cannot move forward with the transaction. However, they

noted that check verification reporting does not present comparable risk of harm because

(1) such reports are used to determine whether a particular check should be accepted, not to

evaluate a consumer’s creditworthiness for credit, a job, or rental housing; and (2) any harm

caused by refusal to accept a check is outweighed by benefits, including alerting the consumer to

potential fraud and preventing them from incurring additional overdraft or non-sufficient funds

fees.

After carefully considering the comment, the Bureau has determined that § 1006.30(a)

should not apply to a debt collector’s furnishing of information about a debt to a check

verification consumer reporting agency. The Bureau finds that a debt collector’s furnishing of

information about a debt to a check verification consumer reporting agency before engaging in

outreach to the consumer about the debt is unlikely to undermine the ability of consumers to

decide whether to pay debts in the same manner as the furnishing of information about debts to

other consumer reporting agencies. As a result, the Bureau has not found that furnishing

information about a debt to a check verification consumer reporting agency before engaging in

outreach to the consumer about the debt constitutes conduct that may have the natural

consequence of harassment, oppression, or abuse in violation of FDCPA section 806, or that is

an unfair or unconscionable means to collect or attempt to collect a debt under FDCPA section

808.

Immediate and frequent reporting appears to be a critical aspect of check verification

consumer reporting, and it appears that imposing a requirement that debt collectors inform

consumers about debts before furnishing information to those check verification consumer

reporting agencies would require significant operational changes and could significantly reduce

the effectiveness of those reports. This is unlike credit-related reporting, which typically

involves less immediate furnishing. The Bureau also finds that the consumer harm that

§ 1006.30(a)(1) is designed to address is not present for check verification consumer reporting

because these reports are unlikely to be used in making credit, employment, or rental housing

decisions. While consumers could also be harmed if they are unaware of checking account

report items, the harm of reducing the effectiveness of the check verification system, including

the potential harm to consumers if checks are accepted by fewer merchants, outweighs the

benefits of requiring communication before furnishing. In addition, the immediacy of the current

check verification system provides countervailing benefits to consumers who are alerted to

potential fraud or to discontinue writing checks on an overdrawn account. Further, a special rule

for check verification consumer reporting agencies is consistent with several State laws

regulating passive collections.

140

For these reasons, the Bureau concludes that furnishing of

information to a check verification consumer reporting agency before engaging in outreach to the

consumer does not raise concerns under FDCPA sections 806 and 808 similar to furnishing to

other types of consumer reporting agencies.

Therefore, the final rule adds § 1006.30(a)(2) to state that § 1006.30(a)(1) does not apply

to a debt collector’s furnishing of information about a debt to a nationwide specialty consumer

reporting agency that compiles and maintains information on a consumer’s check writing history,

as described in FCRA section 603(x)(3).

141

140

Colo. Rev. Stat. sec. 12-14-108 limits when “debt collectors” may furnish information to a consumer reporting

agency, but exempts checks, negotiable instruments, or credit card drafts. California and Utah also lim it when

information can be furnished to a consumer reporting agency, but those laws only apply to “creditors.” Cal. Civ.

Code sec. 1785.26; Utah Code sec. 70C-7-107.

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If and to the extent a check verification consumer reporting agency compiles and maintains other types of

information specified in FCRA section 603(x) (e.g., residential or tenant history), the special rule in § 1006.30(a)(2)

does not apply with respect to a debt collector’s furnishing of that information to the check verification consumer

reporting agency.

For the reasons discussed above, the Bureau is adopting final § 1006.30(a) pursuant to its

authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts

by debt collectors. The Bureau is also adopting final § 1006.30(a) pursuant to its authority to

interpret FDCPA section 806, which prohibits a debt collector from engaging in any conduct the

natural consequence of which is to harass, oppress, or abuse any person in connection with the

collection of a debt, and FDCPA section 808, which prohibits a debt collector from using unfair

or unconscionable means to collect or attempt to collect any debt.

Section 1006.34 Notice for Validation of Debts

FDCPA section 809(a) generally requires a debt collector to provide certain information

to a consumer either at the time that, or shortly after, the debt collector first communicates with

the consumer in connection with the collection of a debt.

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The required information—i.e., the

validation information—includes details about the debt and about consumer protections, such as

the consumer’s rights to dispute and receive verification of the debt and to request information

about the original creditor. When this validation information is provided in writing, the

document containing the information is commonly referred to as a “validation notice.”

The requirement to provide validation information is an important component of the

FDCPA and was intended to improve the debt collection process by helping consumers to

recognize debts that they owe and raise concerns about debts that are unfamiliar. Congress in

1977 considered the requirement a “significant feature” of the FDCPA, explaining that it was

designed to “eliminate the recurring problem of debt collectors dunning the wrong person or

142

See 15 U.S.C. 1692g(a).

attempting to collect debts which the consumer has already paid.”

143

Congress provided the

Bureau with rulemaking authority in 2010 apparently to address continuing inadequacies around

validation information and verification, among other things.

144

In addition, debt collectors have

sought clarification about how to provide information consistent with the FDCPA, noting, for

instance, that a significant number of lawsuits are filed each year alleging deficiencies in their

validation notices.

For these reasons, the Bureau proposed § 1006.34 to require debt collectors to provide

certain validation information to consumers and to specify when and how the information must

be provided. As discussed in more detail below, the Bureau is finalizing § 1006.34 with

modifications in response to feedback and for clarity and consistency with other provisions in

this final rule and the November 2020 Final Rule.

Final § 1006.34(a) sets forth the general requirement to provide validation information

and describes how such information may be provided on a validation notice. Section 1006.34(b)

sets forth definitions for purposes of § 1006.34. Section 1006.34(c) sets forth the validation

information, and § 1006.34(d) sets forth a general requirement that such information be clear and

conspicuous. Section 1006.34(d) also provides safe harbors for use of Model Form B–1 in

appendix B to Regulation F, specified variations of the model notice, or a substantially similar

form, and describes optional disclosures that debt collectors may, but are not required to, provide

143

S. Rep. No. 382, supra n ote 57; see also Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 95 (2d Cir. 2008)

(va lida tion notices “make the rights a nd obliga tions of a potentially hapless debtor a s pellucid a s possible”); Wilson

v. Quadramed Corp., 225 F.3d 350, 354 (3d Cir. 2000); Miller v. Payco-Gen. Am. Credits, Inc., 943 F.2d 482, 484

(4th Cir. 1991); Swanson v. S. Oregon Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 1988).

144

See S. Rep. No. 111-176, a t 19 (“In addition to concerns a bout debt collection tactics, the Committee is

concerned that consumers have little ability to dispute the validity of a debt that is being collected in error.”).

with the validation information.

145

Section 1006.34(e) affirmatively permits debt collectors to

provide validation notices translated into other languages and requires debt collectors who offer

to provide consumers translated notices to provide them to consumers who request them.

As discussed in further detail in the section-by-section analysis of § 1006.34(d), the

Bureau proposed to require that validation notices must be the same as, or substantially similar

to, the proposed model validation notice. The Bureau is not finalizing that requirement. Instead,

the final rule provides certain safe harbors for compliance with the information and form

requirements in § 1006.34(c) and (d)(1) for debt collectors who use the model validation notice,

specified variations of the model notice, or a substantially similar notice.

34(a) Validation Information Required

34(a)(1) In General

FDCPA section 809(a) provides, in relevant part, that, within five days after the initial

communication with a consumer in connection with the collection of any debt, a debt collector

shall send the consumer a written notice containing the validation information, unless that

information is contained in the initial communication or the consumer has paid the debt. The

Bureau proposed § 1006.34(a)(1) to implement and interpret this general requirement.

146

Specifically, proposed § 1006.34(a)(1) provided that, subject to a limited exception for if a

consumer has already paid a debt, a debt collector must provide a consumer the required

145

The Bureau proposed a model validation notice as Model Form B–3. The Bureau is fina lizing that form, with

revisions, as Model Form B–1. This Notice refers to proposed Model Form B–3 a s the “proposed model va lidation

notice” or the “proposed model notice” and final Model Form B–1 a s the “model validation notice” or “model

notice.” This Notice uses the phrase “specified variations of the model notice” to refer to the specifically

enumerated versions of the model notice that receive a safe harbor pursuant to § 1006.34(d)(2)(i) and (ii)

(i.e., notices that are the same as, or substantially simila r to, the model notice but for: omitting some or all of the

optional disclosures that appear on the model notice; including optional disclosures that do not appear on the model

notice; or including certain disclosures on a separate page as permitted by § 1006.34(c)(2)(viii) and (5)).

146

See 84 FR 23274, 23333-34 (May 21, 2019).

validation information either: (1) by sending the consumer a validation notice (i.e., a written or

electronic notice)

147

in the manner permitted by § 1006.42

148

in the initial communication with

the consumer in connection with the collection of the debt (proposed § 1006.34(a)(1)(i)(A)) or

within five days of that initial communication (proposed § 1006.34(a)(1)(i)(B)); or (2) by

providing the validation information orally in the initial communication (proposed

§ 1006.34(a)(1)(ii)).

149

As discussed below, the Bureau is adopting § 1006.34(a)(1) with certain

minor revisions.

Some commenters recommended that the Bureau modify proposed § 1006.34(a)(1)

generally. Some consumer advocate commenters stated that the Bureau should require debt

collectors to provide non-electronic, written validation notices to all consumers. According to at

least one commenter, the Bureau should require a written validation notice even if a debt

collector also provides the validation information electronically. Another consumer advocate

commenter asked the Bureau to require debt collectors to provide a consumer a validation notice

in every communication.

The Bureau declines to require debt collectors to always provide written, non-electronic

validation notices to consumers. For the reasons set forth in the November 2020 Final Rule, the

Bureau interprets FDCPA section 809(a) as not requiring that the notice of debt be provided in

writing when it is contained in the initial communication.

150

Moreover, if FDCPA section 809(a)

147

Proposed § 1006.34(b)(4) defined a validation notice as any written or electronic notice that provides the

va lida tion information described in § 1006.34(c).

148

As fina lized, § 1006.42 generally requires debt collectors to send written disclosures in a manner that is

rea sonably expected to provide a ctual notice, a nd in a form that the consumer may keep a nd access la ter. 85 FR

76734, 76893 (Nov. 30, 2020).

149

Proposed § 1006.34(b)(2) provided that, with limited exceptions, initia l communication means the f irst tim e that,

in connection with the collection of a debt, a debt collector conveys information, directly or indirectly, to the

consumer regarding the debt.

150

85 FR 76734, 76854 (Nov. 30, 2020).

does require that the notice of debt be provided in writing—i.e., if the validation information is

not contained within the initial communication—nothing in the FDCPA prohibits a debt collector

from providing the required written validation notice electronically in accordance with the

consumer-consent provisions of section 101(c) of the E-SIGN Act. In turn, if a statute (here, the

FDCPA) requires a written disclosure, the E-SIGN Act’s consumer-consent provisions specify

requirements pursuant to which debt collectors may send the required written disclosures

electronically. Accordingly, pursuant to § 1006.42, a debt collector may send the validation

notice electronically under § 1006.34(a)(1)(i)(A) (i.e., within the initial communication) if the

debt collector complies with § 1006.42(a)(1), which requires that the debt collector send the

notice in a manner that is reasonably expected to provide actual notice, and in a form that the

consumer may keep and access later. A debt collector may send the validation notice

electronically under § 1006.34(a)(1)(i)(B) (i.e., not within the initial communication) if the debt

collector complies with § 1006.42(a)(1) and also complies with § 1006.42(b), which requires that

the debt collector send the notice in accordance with section 101(c) of the E-SIGN Act. The

Bureau concludes that, if debt collectors send validation notices electronically as described

above, there is a reasonable likelihood that consumers will receive and be able to retain the

notices.

The Bureau determines, therefore, that it is unnecessary and unwarranted to impose the

burden on debt collectors that would result from a requirement to always provide the validation

notice in written, non-electronic form; to provide a validation notice in written form even if the

debt collector also provides the validation notice electronically; or to provide a validation notice

or validation information with every consumer communication.

151

Such requirements would go

beyond the FDCPA’s provisions and would be unduly burdensome on debt collectors, because,

as stated above, the Bureau concludes that the Regulation F provisions that the Bureau is

adopting provide sufficient consumer protection. Accordingly, the Bureau does not impose such

requirements.

The Bureau received few comments specifically about proposed § 1006.34(a)(1)(i).

Commenters who provided feedback supported the Bureau’s proposal. Thus, the Bureau is

adopting § 1006.34(a)(1)(i) largely as proposed.

A large number of commenters responded to the clarification in proposed

§ 1006.34(a)(1)(ii) that debt collectors may provide validation information orally in the initial

communication. Commenters, including most consumer advocates who addressed the topic,

urged the Bureau to prohibit debt collectors from providing validation information orally. These

commenters stated that debt collectors could not effectively convey orally to consumers the

amount of validation information that the Bureau proposed.

152

Commenters argued that, if

validation information were conveyed orally, a consumer would be unable to review the

information at a later time, unless the consumer transcribed or recorded the communication with

the debt collector. Commenters stated that this dynamic would place an unreasonable burden on

consumers and would be atypical compared to other consumer law disclosure regimes, which

151

The Bureau additionally notes that, if a sta tute (here, FDCPA section 809(a)) requires a written disclosure, E-

SIGN Act section 104(c)(1) states that Federal agencies’ authority to interpret E-SIGN Act section 101 (including

the consumer-consent provisions in E-SIGN Act section 101(c)) does not include the “authority to impose or

reimpose any requirement that a record be in a tangible printed or paper form.” See 15 U.S.C. 7004(c)(1).

152

Proposed § 1006.34(c) described the validation information that proposed § 1006.34(a)(1) would have required

debt collectors to provide. As discussed in the section-by-section analysis of § 1006.34(c), the final rule requires

debt collectors to provide up to 18 items of validation information.

mandate that required notices be provided in written form. At least one commenter stated that

oral delivery would be incompatible with the formatting requirements in proposed § 1006.34(d).

On the other hand, some industry commenters supported the Bureau’s clarification that

debt collectors may provide validation information orally. These commenters asked the Bureau

to provide additional guidance about oral delivery of validation information, including, for

example, specific content for an oral notice, such as a script.

As proposed, the Bureau is finalizing the provision in § 1006.34(a)(1)(ii) that debt

collectors may provide the required validation information orally in the initial communication.

The Bureau agrees that there may be significant challenges to conveying the required validation

information orally.

153

Nevertheless, FDCPA section 809(a) does not prohibit oral delivery.

FDCPA section 809(a) states that the required validation information may be “contained in the

initial communication” and that a written notice is mandatory only if that required information is

not contained in the initial communication. Further, FDCPA section 807(11) indicates that the

initial communication may be oral.

154

Accordingly, the Bureau concludes that the most

reasonable interpretation of FDCPA sections 809(a) and 807(11) is that the FDCPA permits the

required validation information to be conveyed orally if it is contained in the initial

communication.

153

Section 1006.34(c) requires a significant amount of validation information that debt collectors may not currently

include in the validation information they provide to consumers. It might be difficult for a debt collector to convey

a ll of the required information orally, pa rticularly in a n initia l communication, which is the only context in which a

debt collector could comply with its legal obligation by providing the validation information orally. Further, real-

time communications with consumers are unpredictable. Accordingly, even if the required components of the

va lida tion information a re contained in the oral communication, the debt collector might not convey them in a way

that meets the requirements of the regulation; for example, as commenters noted the debt collector might not convey

the required information clearly and conspicuously.

154

See 15 U.S.C. 1692e(11).

Moreover, debt collectors providing validation information orally will not be able to use

the model validation notice and therefore will not receive a safe harbor for compliance under

§ 1006.34(d)(2). The Bureau declines to provide additional guidance about oral delivery of

validation information. The Bureau is not aware of debt collectors providing validation

information orally today, and, for the reasons discussed, the Bureau believes they will be

unlikely to do so in the future. As a result, the Bureau concludes that such additional guidance is

not necessary or warranted at this time.

The Bureau proposed comment 34(a)(1)–1 to clarify the provision of validation notices if

the consumer is deceased. Proposed comment 34(a)(1)–1 explained that, if the debt collector

knows or should know that the consumer is deceased, and if the debt collector has not previously

provided the deceased consumer the validation information, a person who is authorized to act on

behalf of the deceased consumer’s estate operates as the consumer for purposes of providing

validation information under § 1006.34(a)(1). Under proposed comment 34(a)(1)–1, a debt

collector attempting to collect a debt from a deceased consumer’s estate generally would provide

the validation information to the named person who is authorized to act on behalf of the deceased

consumer’s estate, if the debt collector had not already provided that information to the

consumer.

As discussed in the section-by-section analysis of § 1006.2(e), the Bureau is interpreting

the term consumer to mean any natural person, whether living or deceased, who is obligated or

allegedly obligated to pay any debt. And the Bureau is adopting commentary clarifying how this

definition operates in the decedent debt context, including with respect to debt collectors’

obligations to provide the validation information and respond to disputes and requests for

original-creditor information. Accordingly, the Bureau is finalizing comment 34(a)(1)–1 as

proposed.

For all of these reasons, and pursuant to its authority under FDCPA section 814(d) to

prescribe rules with respect to the collection of debts by debt collectors, the Bureau is finalizing

§ 1006.34(a)(1) to implement and interpret the FDCPA section 809(a) requirement that debt

collectors provide validation information to consumers.

34(a)(2) Exception

FDCPA section 809(a) contains a limited exception that provides that, if required

validation information is not contained in the initial communication, a debt collector need not

send the consumer a written validation notice within five days of that communication if the

consumer has paid the debt prior to the time that the notice is required to be sent. The Bureau

proposed in § 1006.34(a)(2) to implement this exception by providing that a debt collector who

otherwise would be required to send a validation notice pursuant to § 1006.34(a)(1)(i)(B) is not

required to do so if the consumer has paid the debt prior to the time that § 1006.34(a)(1)(i)(B)

would require the validation notice to be sent. Proposed § 1006.34(a)(2) generally restated the

statute, except for minor changes for organization and clarity.

155

At least two consumer advocate commenters recommended that debt collectors be

required to provide a validation notice even if a consumer has already paid the debt. According

to these commenters, some consumers, including seniors, will pay a debt that they do not owe or

recognize because they “pay first and ask questions later.” These commenters suggested that

validation information would help such consumers assess after the fact whether they paid a debt

that they owed. An industry trade group commenter stated that, for open-end credit, a debt

155

See 84 FR 23274, 23334-35 (May 21, 2019).

collector should be permitted to satisfy § 1006.34(a)(1) by providing a periodic statement

pursuant to Regulation Z, 12 CFR 1026.7, because periodic statements disclose sufficient

account information to consumers.

The Bureau declines to require debt collectors to provide a validation notice if a

consumer has already paid the debt. FDCPA section 809(a) explicitly provides that a debt

collector is not required to send the validation notice if the consumer has paid the debt, and the

Bureau has determined that it is neither necessary nor warranted to adopt a rule requiring

otherwise.

The Bureau also declines to adopt recommendations to include an exception to

§ 1006.34(a)(1) for open-end credit, because a periodic statement provided in accordance with

Regulation Z, 12 CFR 1026.7, is not an adequate substitute for the validation information. Wh ile

such a periodic statement discloses some information about the debt, it typically does not

disclose other information required under the final rule, such as the information about consumer

protections required by FDCPA section 809(a)(3) through (5) and the corresponding provisions

of final § 1006.34.

Accordingly, pursuant to its authority under FDCPA section 814(d) to prescribe rules

with respect to the collection of debts by debt collectors, and to implement and interpret FDCPA

section 809(a), the Bureau is finalizing § 1006.34(a)(2) as proposed.

34(b) Definitions

To facilitate compliance with § 1006.34, proposed § 1006.34(b) defined several terms

that appear throughout the section. As discussed below, the Bureau is finalizing those defin itions

and related commentary with certain modifications in response to feedback. Consistent with the

proposal, unless noted otherwise below, the Bureau is finalizing the definitions to implement and

interpret FDCPA section 809(a) and pursuant to its authority under FDCPA section 814(d) to

prescribe rules with respect to the collection of debts by debt collectors.

34(b)(1) Clear and Conspicuous

The Bureau proposed § 1006.34(b)(1) to define the term clear and conspicuous for

purposes of Regulation F consistent with the standards used in other consumer financial services

laws and their implementing regulations, including, for example, Regulation E, subpart B

(Remittance Transfers).

156

Proposed § 1006.34(b)(1) thus provided that disclosures are clear and

conspicuous if they are readily understandable. The proposal provided that, in the case of

written and electronic disclosures, the location and type size also must be readily noticeable to

consumers and that, in the case of oral disclosures, the disclosures must be given at a volume and

speed sufficient for a consumer to hear and comprehend them.

157

For the reasons discussed

below, the Bureau is adopting § 1006.34(b)(1) largely as proposed but with minor modifications

for clarity and in response to feedback.

An industry commenter objected to the clear and conspicuous definition in proposed

§ 1006.34(b)(1). This commenter stated that a clear-and-conspicuous requirement is

unnecessary in the debt collection context because consumers have an ongoing relationship with

debt collectors, and a consumer therefore has the ability to ask a debt collector to explain a

particular disclosure or communication if the consumer does not understand it.

Other commenters asked the Bureau to clarify the proposed definition. For instance,

industry trade group and consumer advocate commenters offered various suggestions for specific

font size or disclosure placement requirements. At least one industry commenter suggested that

156

See 12 CFR 1005.31(a)(1), comment 31(a)(1)–1.

157

See 84 FR 23274, 23335 (May 21, 2019).

the Bureau explain how proposed § 1006.34(b)(1) would interact with State disclosure laws,

which may have their own clear-and-conspicuous standards that dictate font size or disclosure

placement. An industry trade group commenter asked the Bureau to provide additional guidance

about oral delivery of the validation information because, in the commenter’s view, the proposal

that oral communications be “given at a volume and speed sufficient for a consumer to hear and

comprehend them” was ambiguous.

The Bureau disagrees that ongoing relationships between debt collectors and consumers

make a clear and conspicuous definition unnecessary or unwarranted in the debt collection

context. Consumer financial services laws and their implementing regulations commonly

include standards for clear and conspicuous disclosures provided in the context of ongoing

customer and business relationships between consumers and consumer financial services

providers.

158

Additionally, validation information is provided at the outset of collection

communications. If a consumer chooses not to engage with the debt collector, no ongoing

communications will be established.

The Bureau declines to further clarify the clear and conspicuous definition in

§ 1006.34(b)(1) by, for example, dictating font sizes or requirements regarding disclosure

placement as requested by some commenters. Different debt collectors may design their

communications in different ways, and the Bureau does not believe it is necessary or warranted

to specify such details, as long as the disclosure satisfies the clear and conspicuous standard. In

158

See, e.g., 12 CFR 1026.5(a)(1)(i) (disclosures for open-end credit) a nd 12 CFR 1026.17(a)(1) (disclosures for

closed-end credit). Moreover, a consumer does not typically get to choose which debt collector collects the

consumer’s debt, whereas a consumer does choose his or her financial services providers. Further, some customer

relationships between consumers and debt collectors may be of shorter duration than customer relationships between

consumers and other types of consumer financial services providers. These factors suggest that a standard for clear

and conspicuous disclosures may be even more important in the debt collection context than in other consumer

fina ncial services contexts.

addition, the definition is consistent with, and provides the same level of specificity as, standards

in some other consumer financial services laws and their implementing regulations, including but

not limited to the Bureau’s Remittance Transfers rule,

159

which do not specify font size or

disclosure placement requirements. Moreover, the Bureau concludes that the lack of more

prescriptive guidance will not impose material burden on debt collectors. As discussed in the

section-by-section analysis of § 1006.34(d)(2), a debt collector who uses the model validation

notice, specified variations of the model notice, or a substantially similar form, receives a safe

harbor for the information requirements in § 1006.34(c) and for the clear-and-conspicuous

requirement in § 1006.34(d)(1). Because debt collectors may use the model validation notice,

specified variations of the model notice, or a substantially similar form if providing validation

notices, debt collectors need not incur significant expenses ascertaining what meets the clear-

and-conspicuous standard. Nevertheless, the final rule does clarify that, in the case of written

and electronic disclosures, although no minimum font size is required, the location and type size

must be both readily noticeable and legible to consumers.

160

The Bureau declines to revise § 1006.34(b)(1) to clarify how the definition of clear and

conspicuous interrelates with State disclosure laws. A debt collector can comply with both

§ 1006.34(b)(1) and State disclosure requirements that specify font size or disclosure placement.

With respect to font size, the Bureau concludes, in general, that debt collectors satisfying State-

law minimum-font-size requirements will also satisfy the standard in § 1006.34(b)(1) for a type

size that is readily noticeable and legible to consumers. With respect to disclosure placement, as

159

See 12 CFR 1005.31(a)(1), comment 31(a)(1)–1. See also, e.g., the general disclosure requirements for open-end

and closed-end credit in, respectively, 12 CFR 1026.5(a)(1) a nd 1026.17(a)(1) a nd their commentary.

160

The section-by-section a nalysis of § 1006.38(b)(2) discusses a new safe harbor from the overshadowing

prohibition in § 1006.38(b)(1) for a debt collector who uses the model validation notice.

discussed in the section-by-section analysis of § 1006.34(d)(3)(iv), a debt collector may place

disclosures specifically required under other applicable law, which includes disclosures

specifically required by State law, on the reverse (or, in certain specified circumstances, on the

front) of the validation notice. The Bureau believes that § 1006.34(d)(3)(iv) will permit debt

collectors to provide State law disclosures in a manner that is clear and conspicuous under

applicable law.

The Bureau also declines to further clarify the meaning of clear and conspicuous in the

context of oral delivery of validation information. The Bureau determines that the proposed and

final regulatory text is sufficiently clear and that the final rule will not impose an undue burden

on debt collectors, particularly in light of the Bureau’s expectation that few, if any, oral

disclosures will be provided.

For the reasons discussed above, the Bureau is finalizing § 1006.34(b)(1) to provide that

clear and conspicuous means readily understandable and that, in the case of written and

electronic disclosures, the location and type size also must be readily noticeable and legible to

consumers, although no minimum type size is mandated. Final § 1006.34(b)(1) also provides

that oral disclosures must be given at a volume and speed sufficient for the consumer to hear and

comprehend them.

34(b)(2) Initial Communication

FDCPA section 809(a) requires debt collectors to provide consumers with certain

validation information either in the debt collector’s initial communication with the consumer in

connection with the collection of the debt, or within five days after that initial communication.

FDCPA section 803(2) defines the term communication broadly to mean the conveying of

information regarding a debt directly or indirectly to any person through any medium.

161

FDCPA section 809(d) and (e) identifies particular communications that are not initial

communications for purposes of FDCPA section 809(a) and that therefore do not trigger the

validation notice requirement.

162

Pursuant to FDCPA section 809(d), an initial communication

excludes a communication in the form of a formal pleading in a civil action. Pursuant to FDCPA

section 809(e), an initial communication also excludes the sending or delivery of any form or

notice that does not relate to the collection of the debt and is expressly required by the Internal

Revenue Code of 1986, title V of the Gramm-Leach-Bliley Act, or any provision of Federal or

State law relating to notice of a data security breach or privacy, or any regulation prescribed

under any such provision of law.

The Bureau proposed § 1006.34(b)(2) to implement FDCPA section 809(a), (d), and (e)

by defining the term initial communication. The proposed definition largely restated the FDCPA

and defined initial communication as the first time that, in connection with the collection of a

debt, a debt collector conveys information, directly or indirectly, regarding the debt to the

consumer, other than a communication in the form of a formal pleading in a civil action, or a

communication in any form or notice that does not relate to the collection of the debt and is

expressly required by any of the laws referenced in FDCPA section 809(e).

163

An industry trade group recommended a bankruptcy-specific exception to the definition

of initial communication for debt collectors collecting debts owed by consumers in bankruptcy.

The commenter expressed concern that certain actions by a debt collector in the context of a

161

See 15 U.S.C. 1692a(2). The November 2020 Final Rule implemented this definition in § 1006.2(d). 85 FR

76734, 76888 (Nov. 30, 2020).

162

See 15 U.S.C. 1692g(d), (e).

163

See 84 FR 23274, 23335 (May 21, 2019).

consumer’s bankruptcy proceeding, in particular filing a proof of claim, may be construed to be

an initial communication and therefore trigger the FDCPA section 809(a) validation notice

requirement.

164

Additionally, according to the commenter, content on the validation notice,

including the debt collection communication disclosure required by FDCPA section 807(11),

could be construed as a demand for payment that violates the automatic stay provisions of the

United States Bankruptcy Code (Bankruptcy Code)

165

or, if the consumer has been relieved of

personal liability, the discharge injunction.

166

According to the commenter, some courts have

opined that a debt collector would face an irreconcilable conflict between complying with the

FDCPA and the Bankruptcy Code if the debt collector were required to provide a validation

notice to a consumer in bankruptcy.

167

The Bureau has determined to interpret the term initial communication not to include

proofs of claim filed in bankruptcy proceedings. Courts have reached different conclusions

about whether the FDCPA conflicts with the Bankruptcy Code.

168

The Bureau is unaware of any

case definitively holding that a proof of claim is an initial communication and that a debt

164

To receive a distribution from a bankruptcy estate, a creditor generally must file with the bankruptcy court a

proof of claim, which includes details about an alleged debt or interest. See Fed. R. Bankr. P. 3002.

165

See 11 U.S.C. 362.

166

A debtor’s bankruptcy petition operates as an a utomatic stay that, among other things, prohibits “any a ct to

collect, assess, or recover a claim against the debtor that arose before the commencement of the case.” 11 U.S.C.

362(a)(6). When a debtor’s liability is discha rged through bankruptcy, the discharge “operates as an injunction

against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or

offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived.”

11 U.S.C. 524(a )(2).

167

See, e.g., In re Chaussee, 399 B.R. 225, 238 (B.A.P. 9th Cir. 2008) (“In our opinion, the debt validation

provisions required by the FDCPA clea rly conflict with the claims processing procedures contemplated by the

[Ba nkruptcy] Code a nd Rules.”).

168

See Walls v. Wells Fargo Bank, 276 F.3d 502, 511 (9th Cir. 2002) (holding that the Bankruptcy Code precludes

application of FDCPA requirements in bankruptcy cases); Chaussee, 399 B.R. at 239 (sa me); contra Simon v. FIA

Card Servs., N.A., 732 F.3d 259, 274 (3d Cir. 2013) (stating that when “FDCPA cla ims arise f rom communications

a debt collector sends a bankruptcy debtor in a pending bankruptcy proceeding, a nd the communications are alleged

to violate the Bankruptcy Code or Rules, there is no categorical preclusion of the FDCPA claims”).

collector therefore must provide a validation notice after filing a proof of claim. On the other

hand, some courts have held that proofs of claim are not initial communications because, under

FDCPA section 809(d), they are communications in the form of a formal pleading in a civil

action.

169

Further, the Bureau has decided to permit a debt collector to file a proof of claim in a

bankruptcy proceeding as required by the Bankruptcy Code without thereby triggering the debt

collector’s obligation to provide a validation notice under the FDCPA, because the Bureau finds

it unlikely that consumer harm will result if a consumer does not receive a validation notice

subsequent to a proof of claim in bankruptcy. The bankruptcy proof-of-claim form is filed under

penalty of perjury, and a person who files a fraudulent claim could be fined up to $500,000,

imprisoned for up to 5 years, or both.

170

Thus, the Bureau concludes that bankruptcy proof-of-

claim forms generally are likely to contain accurate information about the debt.

Accordingly, to provide clarity for debt collectors while maintaining protections for

consumers, the Bureau is interpreting the term initial communication not to include proofs of

claim filed in bankruptcy. Specifically, the Bureau is adopting new comment 34(b)(2)–1, which

clarifies that a proof of claim that a debt collector files in a bankruptcy proceeding in accordance

with the requirements of the Bankruptcy Code is a communication in the form of a formal

pleading in a civil action and therefore is not an initial communication for purposes of § 1006.34.

The Bureau adopts this comment as an interpretation of the phrase “[a] communication in the

form of a formal pleading in a civil action” in FDCPA section 809(d). The Bureau interprets that

169

See Simon, 732 F.3d at 273; Townsend v. Quantum3 Grp., LLC, 535 B.R. 415, 423 (M.D. Fla. 2015); In re

Brimmage, 523 B.R. 134, 141-42 (Bankr. N.D. Ill. 2015).

170

The official bankruptcy proof-of-claim f orm is a vaila ble here: https://www.uscourts.gov/forms/bankruptcy-

forms/proof-claim-0.

phrase to include a proof of claim that a debt collector files in a bankruptcy proceeding in

accordance with the requirements of the Bankruptcy Code.

The Bureau acknowledges that other scenarios may exist in which a debt collector

communicates with a consumer in bankruptcy and subsequently may be required to provide a

validation notice. To the extent that debt collectors do provide validation notices to consumers

in bankruptcy, § 1006.34(a)(1) implements an existing FDCPA disclosure requirement and does

not create a new tension between the FDCPA and the Bankruptcy Code. In addition, nothing in

the final rule requires debt collectors to include payment requests in the validation information;

instead, payment requests are optional disclosures that § 1006.34(d)(3)(iii) permits debt

collectors to include along with the validation information. Consequently, a debt collector

concerned that a payment request would violate the Bankruptcy Code’s automatic stay or

discharge injunction is not required to include a payment request and, additionally, could use the

model validation notice, specified variations of the model notice, or a substantially similar form,

without a payment request and receive a safe harbor under § 1006.34(d)(2).

An industry trade group recommended that the Bureau exclude from the § 1006.34(b)(2)

definition of initial communication the notice of transfer of loan servicing required by

Regulation X.

171

According to the commenter, after an FDCPA-covered mortgage debt is

transferred and a consumer receives a servicing transfer notice, the transferee may not have

received all the information necessary to send a validation notice within the five-day timeframe

171

Genera lly, under Regulation X, each transferor servicer and transferee servicer of any mortgage loan shall

provide to the borrower a notice of transfer for any assignment, sale, or transfer of the servicing of the mortgage

loan. 12 CFR 1024.33(b)(1). Generally, the transferor servicer shall provide the notice of transfer to the borrower

not less than 15 days before the effective date of the transfer of the servicing of the mortgage loan. The tra nsferee

servicer shall provide the notice of transfer to the borrower not more than 15 days after the effective date of the

tra nsfer. The transferor and transferee servicers may provide a single notice, in which case the notice shall be

provided not less than 15 days before the effective date of the transfer of the servicing of the m ortgage loa n.

12 CFR 1024.33(b)(3)(i).

required by FDCPA section 809(a). For this reason, the commenter suggested that Regulation X

servicing transfer notices should not trigger the validation information requirement.

The Bureau declines to interpret the term initial communication to exclude servicing

transfer notices required by Regulation X. Section 1006.34(b)(2) largely mirrors existing

language in FDCPA sections 803(2) and 809(a), (d), and (e) and does not impose new

substantive requirements or obligations on covered entities. As discussed in the section-by-

section analysis of § 1006.34(c), Regulation F will result in validation notices containing more

information about the debt than they typically do today, but that information is, generally, either

routine account information that owners of debts currently provide to debt collectors or that

owners of debts can include without significant additional expense. Although the commenter

argues that there may be timing considerations unique to mortgage servicing transfer notices, the

Bureau determines that such timing concerns do not warrant an exception that would deem a

mortgage servicing transfer notice, even one that does convey information, directly or indirectly,

regarding the debt to the consumer to be excluded from the definition of an “initial

communication.”

Other commenters asked the Bureau to clarify whether a consumer-initiated

communication, such as a consumer visiting a debt collector’s website or a consumer leaving a

voicemail with a debt collector, would constitute an initial communication under proposed

§ 1006.34(b)(2). The Bureau notes that, under § 1006.34(b)(2), for an initial communication to

occur, a debt collector must “convey[] information, directly or indirectly, regarding the

debt . . . .” Section 1006.34(b)(2) is clear that, if a debt collector conveys no information,

directly or indirectly, regarding the debt, an initial communication has not occurred and,

consequently, the validation notice requirement has not been triggered. Thus, a consumer’s

voicemail left with a debt collector generally would not qualify as an initial communication.

Similarly, an initial communication generally would not include a consumer’s visit to a debt

collector’s website, unless during that visit the debt collector conveyed information regarding the

consumer’s specific debt.

172

For the reasons discussed above, the Bureau is finalizing § 1006.34(b)(2) largely as

proposed but with a revision to clarify that proofs of claim filed in bankruptcy proceedings are

not initial communications.

34(b)(3) Itemization Date

FDCPA section 809(a)(1) requires debt collectors to disclose to consumers, either in the

debt collector’s initial communication in connection with the collection of the debt, or within

five days after that communication, the amount of the debt.

173

The Bureau proposed in

§ 1006.34(c)(2)(vii) through (ix) to interpret the phrase “amount of the debt” to mean that debt

collectors must disclose the amount of the debt as of a particular “itemization date.”

174

facilitate compliance with proposed § 1006.34(c)(2), the Bureau proposed § 1006.34(b)(3) to

define itemization date as one of four reference dates for which a debt collector can ascertain the

amount of the debt. The proposed reference dates were the last statement date, the charge-off

date, the last payment date, and the transaction date.

175

172

For example, a debt collector potentially could convey information regarding the debt during a consumer’s visit

to a website through a website chat feature.

173

See 15 U.S.C. 1692g(a)(1).

174

Proposed § 1006.34(c)(2)(vii) and (viii) would have required debt collectors to disclose, respectively, the

itemization date and the amount of the debt on the itemization date. Proposed § 1006.34(c)(2)(ix) would have

required debt collectors to disclose an itemization of the debt reflecting interest, fees, payments, and credits since the

itemization date. For additional discussion of these provisions, which have been renumbered in the final rule, see

the section-by-section a nalysis of § 1006.34(c)(2)(vi) through (viii).

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See 84 FR 23274, 23335-37 (May 21, 2019). The reference dates were set forth in proposed § 1006.34(b)(3)(i)

through (iv) and are discussed in the section-by-section analysis of those paragraphs below.

The proposed definition of itemization date was designed to allow the use of dates that

debt collectors could identify with relative ease because they reflect routine and recurring events,

and that correspond to notable events in the debt’s history that consumers may recall or be able

to verify with records. The proposed definition also was intended to include dates for which debt

collectors typically may receive account information from debt owners and that, therefore, debt

collectors would be able to use to provide the disclosures proposed in § 1006.34(c)(viii) and (ix).

Proposed comment 34(b)(3)–1 explained that a debt collector could select any of the four

reference dates as the itemization date. Once a debt collector used one of the reference dates for

a specific debt in a communication with a consumer, however, the debt collector would be

required to use that reference date for that debt consistently when providing disclosures pursuant

to § 1006.34 to that consumer.

For the reasons discussed below, the Bureau is adopting § 1006.34(b)(3) and its related

commentary largely as proposed but with minor wording changes and to include an additional

reference date in response to feedback: the judgment date. The Bureau also is adopting new

comment 34(b)(3)–2, which provides that a debt collector may use a different reference date than

a prior debt collector used for the same debt.

Some industry commenters supported the itemization date definition in proposed

§ 1006.34(b)(3). At least two industry commenters supported providing debt collectors with a

choice of several reference dates because a debt collector might not be able ascertain the amount

of the debt on a single reference date. According to an industry trade group commenter, the

proposed reference dates would provide adequate flexibility, as a creditor’s information systems

will have recorded at least one of those dates for any given debt. Another industry trade group

commenter stated that the proposal’s standardization of account information would allow debt

collectors to build better internal procedures and improve consumer communication practices.

An industry commenter stated that proposed § 1006.34(b)(3) would require significant client

education and information technology investment but ultimately concluded that the framework

was feasible.

Other commenters objected to proposed § 1006.34(b)(3). An industry commenter stated

that creditors may provide debt collectors information about multiple reference dates. According

to this commenter, analyzing creditor records to identify and organize account information as of

a single reference date would be complicated, costly, and increase the likelihood of validation

notice errors. A group of consumer advocate commenters stated that, instead of permitting debt

collectors to choose between reference dates, § 1006.34(b)(3) should define the itemization date

as a single reference date supported by consumer testing.

The Bureau determines that § 1006.34(b)(3) will facilitate compliance with the

itemization date-related requirements in final § 1006.34(c)(2)(vi) through (viii). Account

information available to debt collectors may vary by debt type because some account

information is not universally tracked or used across product markets. To facilitate the ability of

debt collectors across debt markets to comply with Regulation F, the final rule permits debt

collectors to determine the itemization date by selecting from one of five reference dates for

which they can ascertain the amount of the debt.

The Bureau finds that this framework will not result in undue industry burden. Debt

collectors today routinely analyze and organize account information included in files from

creditors when creditors place accounts for collection. Debt collectors should be able to use or

build on these existing functions to select an itemization date based on the definition in

§ 1006.34(b)(3). Therefore, even if creditors provide or retain account information based on

multiple reference dates, debt collectors should not face substantial new costs or litigation risks

from complying with § 1006.34(b)(3).

The Bureau declines consumer advocates’ suggestion to specify a single reference date.

As discussed in the proposal, the Bureau considered requiring debt collectors to provide an

itemization of the debt based on a single reference date but rejected that approach because of the

infeasibility of identifying a single reference date that applies to all debt types across all relevant

markets.

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The group of consumer advocate commenters that recommended a single reference

date did not suggest or provide evidence that it would be feasible to identify a single date that

would be appropriate for all types of debt. The Bureau also declines to exercise its discretion to

conduct consumer testing to attempt to determine an optimal itemization date for debt collectors

to use within each debt collection market (e.g., mortgage debt, credit card debt, student loan

debt, medical debt, and so on). The Bureau determines that such testing is not necessary or

warranted, because the Bureau finds that debt collectors’ use of any one of the five itemization

dates set forth in § 1006.34(b)(3) should correspond, in most cases, to events in the debt’s history

that consumers may recall or be able to verify with records.

In the proposal, the Bureau requested comment on whether the itemization date should be

structured as a prescriptive ordering of reference dates, such as a hierarchy that would permit a

debt collector to use a date listed later in the hierarchy only if the debt collector did not have

information about any dates earlier in the hierarchy. Industry and industry trade group

commenters generally favored the proposed flexible approach. According to commenters, a

prescriptive ordering would significantly increase costs and litigation risk for debt collectors. As

noted above, consumer advocates expressed concern that the proposed approach would result in

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See 84 FR 23274, 23336 (May 21, 2019).

disclosure of itemization dates that are not meaningful to consumers and urged the Bureau to use

consumer testing to determine a date that would be meaningful.

The Bureau agrees that a prescriptive ordering could impose undue costs and litigation

risks for debt collectors. In addition, as discussed below in the section-by-section analysis of

§ 1006.34(b)(3)(i) through (v), each reference date may be meaningful to consumers because it

corresponds to a notable event in the debt’s history that consumers may recall or be able to verify

with records. Because each reference date may be meaningful to a consumer, and because each

reference date may be more or less meaningful to the consumer than one of the other reference

dates depending on the circumstances surrounding the debt, there may not be a benefit to

consumers if the Bureau were to structure the dates as a hierarchy. The Bureau therefore

declines to adopt a prescriptive ordering of the reference dates.

Some commenters who did not object to the proposed itemization date framework in

principle either raised concerns that the proposed reference dates would not accommodate debts

in all product markets or recommended additional reference dates. At least one industry trade

group commenter asked the Bureau to clarify what reference date debt collectors should use for

debts in bankruptcy. An industry commenter stated that the proposal might not accommodate a

debt a consumer owes to a government, such as a tax debt. According to this commenter,

although the FDCPA does not cover many debts consumers owe to governments,

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some debt

collectors who collect debts on behalf of Federal government agencies are legally or

177

FDCPA section 803(5) defines a “debt” as any obligation arising out of a transaction “primarily for personal,

family, or household purposes.” 15 U.S.C. 1692a(5). According to the commenter, a debt a consumer owes to a

government in many cases does not meet this definition.

100

contractually obliged to abide by the FDCPA.

178

This commenter stated that the proposed

reference dates might not accommodate tax debt because, in some instances, it will be the case

that no previous statement was provided, no prior payment was made, and there was no

transaction per se between the consumer and the government creditor.

According to another commenter, an additional reference date for student loan debt is

necessary because debt collectors collecting Federal student loans do not receive any of the

proposed reference dates at the time of placement. Some commenters suggested that the Bureau

permit debt collectors to use the date of default as defined by the Higher Education Act of 1965;

commenters argued that this date is a widely used reference date in the student loan market.

179

By contrast, an FTC commissioner urged the Bureau not to use the Higher Education Act’s

definition of default and instead to use the date a student loan borrower becomes 90 days past

due.

In addition, an industry commenter recommended that § 1006.34(b)(3) incorporate:

(1) the date a creditor places a debt with the debt collector, or (2) the date the debt collector

provides validation information to the consumer. Another industry commenter suggested that

§ 1006.34(b)(3) incorporate the date of a previously obtained court judgment.

The Bureau determines that § 1006.34(b)(3)—in conjunction with the five reference dates

described in § 1006.34(b)(3)(i) through (v)—provides adequate flexibility for debts in all product

178

For example, debt collectors who collect on behalf of the Internal Revenue Service under a “qualified tax

collection contract” generally are required by statute to comply with the FDCPA. See 26 U.S.C. 6306(g) (“The

provisions of the [FDCPA] sha ll a pply to a ny qualified tax collection contract, except to the extent superseded by

section 6304, section 7602(c), or by any other provision of this title.”).

179

The Higher Education Act defines “default” as “the failure of a borrower . . . to m a ke an installm ent payment

when due, or to meet other terms of the promissory note, the Act, or regulations as applicable, if the Secretary or

guaranty agency finds it reasonable to conclude that the borrower and endorser, if any, no longer intend to honor the

obligation to repay, provided that this failure persists for—(1) 270 days for a loan repayable in monthly installments;

or (2) 330 days for a loan repayable in less frequent installments.” 34 CFR 682.200(b).

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markets, including for debts in bankruptcy. A debt collector may choose which of the five

reference dates to use based on the facts and circumstances surrounding the history of the debt—

e.g., whether a creditor provided statements, whether the consumer made payments—and the

information available to the debt collector.

With respect to which reference date a debt collector should use to itemize a tax

obligation a consumer owes to a government, the date the tax was assessed may be a transaction

date for tax debt, as discussed in the section-by-section analysis of § 1006.34(b)(3)(iv). In

addition, a date on which the government provided a written invoice or tax bill may constitute a

last statement date for tax debt under § 1006.34(b)(3)(i).

The Bureau determines that a reference date specific to student loan debt is unnecessary

and unwarranted because the reference dates in § 1006.34(b)(3) are sufficient. For virtually any

student loan debt, there will be a last statement date as described in § 1006.34(b)(3)(i), a last

payment date as described in § 1006.34(b)(3)(ii), or a transaction date as described in

§ 1006.34(b)(3)(iv). For many student loan debts, all three reference dates will exist.

The Bureau also declines to incorporate into § 1006.34(b)(3) the date of placement or the

date the debt collector provides the validation notice. From a consumer’s perspective, these

dates do not correspond to notable events in a debt’s history that the consumer may recall or be

able to verify. As noted above, however, in response to feedback, the Bureau is adding a new

reference date called the “judgment date,” which is the date of a final court judgment that

determines the amount of the debt owed by the consumer. The judgment date is discussed in the

section-by-section analysis of final § 1006.34(b)(3)(v).

With respect to the Bureau’s request for comment about whether a subsequent debt

collector should be permitted to use a different itemization date than a prior debt collector used

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for the same debt, industry and industry trade group commenters generally agreed that requiring

debt collectors to use the same reference date as a prior collector would be burdensome and

impractical. These commenters stated that debt collectors would be unable to ensure compliance

with such a requirement because a creditor might not disclose the reference date that a prior debt

collector used. By contrast, an academic and a consumer advocate commenter stated that a debt

collector should be required to use the same itemization date the prior debt collector used

because a consumer may not be able to assess the amount owed if the subsequent debt collector

uses a different reference date.

The final rule permits a debt collector to use a different itemization date than a prior debt

collector used for the same debt. The availability of account information, including about a prior

debt collector’s activities, to a subsequent debt collector depends on the creditor or debt buyer

who places the debt with the subsequent debt collector. If the creditor or debt buyer does not

provide the previously used itemization date, the subsequent debt collector may be unable to

determine that date, and therefore fail to comply with a requirement to use it. It is conceivable

that, were the rule to require use of the same itemization date previously used, debt collectors

and creditors could begin to structure their contracts and processes to enable creditors and debt

collectors to transfer a previously used itemization date. However, establishing such contracts

and processes would likely impose costs on creditors and debt collectors,

180

and those costs

would likely be passed on to consumers. Further, the Bureau finds that the costs are not

warranted because permitting a subsequent debt collector to use a different itemization date will

180

In order for the contractual framework and processes to achieve the desired result of a creditor passing the

previously used itemization date to the current debt collector, creditors would have to structure contracts to require

the previous debt collectors to pass back to the creditors the previously used itemization dates so that the creditors,

in turn, can pass them on to the current debt collectors. Developing and implementing such contractual provisions

and processes across the debt collection industry would likely im pose potentially significant co sts.

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maintain protections for consumers, as long as the debt collector uses one of the five itemization

dates specified in the rule. As stated above, the Bureau finds that the five itemization dates are

all dates that should result in reasonably meaningful and recognizable debt amounts for

consumers. Accordingly, the Bureau is adopting new comment 34(b)(3)–2 to clarify that, when

selecting an itemization date pursuant to § 1006.34(b)(3), a debt collector may use a different

reference date than a prior debt collector who attempted to collect the debt.

For the reasons set forth above, the Bureau is finalizing § 1006.34(b)(3) and its related

commentary with minor wording changes and to include a new reference date, the judgment

date, in § 1006.34(b)(3)(v). In addition, the Bureau is adopting new comment 34(b)(3)–2 to

explain that a debt collector may use a different reference date than a prior debt collector. The

Bureau is finalizing § 1006.34(b)(3) and § 1006.34(b)(3)(i) through (v), discussed below,

pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the

collection of debts by debt collectors and pursuant to its authority under Dodd-Frank Act section

1032(a) to prescribe rules to ensure that the features of consumer financial products and services

are disclosed to consumers fully, accurately, and effectively.

34(b)(3)(i)

The Bureau proposed in § 1006.34(b)(3)(i) to permit debt collectors to use as the

itemization date the date of the last periodic statement or written account statement or invoice

provided to the consumer. Proposed comment 34(b)(3)(i)–1 explained that a statement provided

by a creditor or a third party acting on the creditor’s behalf, including a creditor’s service

provider, may constitute the last statement provided to the consumer for purposes of

§ 1006.34(b)(3)(i).

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Commenters disagreed about whether the Bureau should adopt the last statement date as

a permissible reference date. Several industry and industry trade group commenters supported

the proposal, stating that, for some debts, the last statement date is readily available to debt

collectors and recognizable to consumers. Some commenters stated that, even when creditors do

not initially provide periodic statements to debt collectors, such statements are available upon

request. However, some consumer advocate commenters stated that the last statement date may

not be meaningful to some consumers and may not help them recognize a debt. For example, a

commenter stated that a creditor may send duplicates of the same periodic statement or invoice

to a consumer multiple times, even when the balance is changing due to interest or fees. In this

scenario, the commenter said, the last statement a consumer received would not reflect the actual

amount owed and would not be helpful to the consumer.

At least two commenters stated that a validation notice provided by a prior debt collector

should not constitute a last statement for purposes of § 1006.34(b)(3)(i). According to a

consumer advocate commenter, the date of a prior validation notice will not be meaningful to

consumers and, consequently, an itemization as of that date will not help consumers recognize an

alleged debt. An industry trade group commenter advised against relying on a validation notice

provided by a prior debt collector because creditors generally do not provide previously sent

validation notices to subsequent debt collectors.

The Bureau determines that the last statement date may be used as a reference date.

Many creditors or third parties acting on a creditor’s behalf routinely provide consumers with

account statements, such as periodic statements or invoices. If a consumer has received an

account statement from a creditor, the consumer either may recognize the date that they last

105

received a statement or may be able to verify that date in their records.

181

Further, last statement

information is often readily available to debt collectors, as debt collectors frequently receive, or

have the ability to request, last statement information or records from creditors.

The Bureau determines that only a last statement or invoice provided to a consumer by a

creditor, as opposed to a statement, such as a validation notice, provided by a debt collector,

should serve as a basis for a last statement date as defined in § 1006.34(b)(3)(i) because

consumers may be more likely to recall or be able to verify a statement sent by a creditor than by

a debt collector. This may be true even if a creditor issues a statement after the debt has gone

into collection. Under § 1006.34(b)(3)(i), such a new statement may serve as the last statement

for purposes of the itemization date.

For these reasons, the Bureau is finalizing § 1006.34(b)(3)(i) and its related commentary

with revisions to provide that only a statement or invoice provided by a creditor qualifies as a

last statement for purposes of § 1006.34(b)(3)(i). Specifically, the Bureau is revising

§ 1006.34(b)(3)(i) to state that the last statement date is the date of the last periodic statement or

written account statement or invoice provided to the consumer by a creditor. The Bureau also is

revising comment 34(b)(3)(i)–1 to provide that a statement or invoice provided by a debt

collector is not a last statement for purposes of § 1006.34(b)(3)(i), unless the debt collector is

also a creditor.

34(b)(3)(ii)

The Bureau proposed in § 1006.34(b)(3)(ii) to permit debt collectors to use the date that

the debt was charged off as the itemization date.

181

This is likely to be true even if the consumer has received a duplicative statement as the last statement. In that

scenario, under § 1006.34(c)(2)(vii), which requires a debt collector to disclose the amount of the debt on the

item iza tion date, the debt a mount that the debt collector discloses to the consumer m ust be the debt a mount as of that

last statement date.

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An industry trade group and an industry commenter supported the use of the charge-off

date, particularly for debts associated with open-end credit, such as credit cards. The

commenters stated that charge off is a regulated Federal standard for consumer credit

182

and

would be a reliable reference date for itemization-related disclosures in some circumstances. An

industry trade group commenter stated that creditors frequently provide debt collectors account

information as of the charge-off date. Commenters stated that consumers may recognize the

amount due as of the charge-off date because some creditors provide charge-off statements that

reflect the charge-off balance and, they said, consumers have the ability to review these charge-

off statements.

Other commenters objected to including the charge-off date as a permissible reference

date. An industry commenter stated that not all creditors maintain account information as of the

charge-off date or communicate that information to debt collectors at placement. Consumer

advocates and at least two industry trade group commenters stated that, although the charge-off

date may be widely used for some financial products, it may not resonate with consumers or help

them recognize a debt because consumers might not know the charge-off date.

183

The Bureau determines that the charge-off date may be used as a reference date.

Creditors frequently provide account information as of the charge-off date for various types of

debts, including credit card debt, to debt collectors. The Bureau acknowledges that not all

creditors maintain account information as of the charge-off date or provide such information to

debt collectors, but the charge-off date is only one of five reference dates specified in the final

182

65 FR 36903 (June 12, 2000); Off. of the Comptroller of the Cu rrency, Bulletin 2000-20, Uniform Retail Credit

Classification and Account Management Policy (June 20, 2000).

183

An individual commenter requested clarification whether, for medical debt, the date of charge off is the date a

creditor places the account for collection. The Bureau is not aware that such a definition is commonly used.

107

rule. Further, account information at charge off is readily available to a sufficiently large

number of debt collectors—including collectors of credit card debt—to justify its adoption as a

reference date. In addition, while consumers might not know the specific charge-off date, they

may, in fact, recognize account information as of approximately the charge-off date because

charge off often occurs at around the time the creditor provided a last account statement.

Further, as noted by commenters, some creditors may provide consumers with charge-off

statements that reflect the balance as of the charge-off date.

Accordingly, the Bureau is finalizing § 1006.34(b)(3)(ii) as proposed.

34(b)(3)(iii)

The Bureau proposed in § 1006.34(b)(3)(iii) to permit debt collectors to use the date the

last payment was applied to the debt as the itemization date.

Industry and consumer advocate commenters generally supported proposed

§ 1006.34(b)(3)(iii). These commenters agreed that account information as of the last payment

date is readily available to debt collectors and recognizable to consumers. According to one

consumer advocate, a consumer may have a general idea of when a bill was last paid, especially

if the consumer’s delinquency was related to a significant life event, such as a job loss, a divorce,

or an illness. Accordingly, the Bureau determines that the last payment date as defined in

§ 1006.34(b)(3)(iii) is an appropriate reference date.

Commenters asked the Bureau to clarify whether a third-party payment could serve as the

basis for the last payment date. For example, several trade group commenters stated that, if a

consumer’s car is repossessed, the sale of the collateral may be applied to the consumer’s

balance after receipt of the consumer’s last payment. Another commenter raised the possibility

of third-party payments and insurance adjustments in the medical debt context. A group of

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consumer advocates recommended that only a payment from a consumer to a creditor should

serve as the basis for a last payment date. According to this commenter, a last consumer

payment to a prior debt collector may not be significant or recognizable to a consumer.

The Bureau determines that third-party payments may serve as the basis for the last

payment date under § 1006.34(b)(3)(iii). The Bureau finds that the date of a third-party payment

on the debt, such as a payment from an auto repossession agent or an insurance company, may

be meaningful to a consumer because such payments may be accompanied by a notice to the

consumer, and therefore the consumer could recognize or verify with records the date of such

payments.

The Bureau also determines that a consumer’s payment to a prior debt collector may

serve as the last payment date. The Bureau finds that consumers are at least as likely to

recognize or be able to verify with records the status of the debt as of the consumer’s last

payment to a prior debt collector as consumers are able to recognize or verify an earlier (perhaps

much earlier) payment to the creditor, particularly if the debt has been outstanding for a long

time.

For these reasons, the Bureau is finalizing § 1006.34(b)(3)(iii) as proposed to provide that

the last payment date is the date the last payment was applied to the debt. The Bureau also is

adopting new comment 34(b)(3)(iii)–1, which clarifies that a third-party payment applied to the

debt, such as a payment from an auto repossession agent or an insurance company, can be a last

payment for purposes of § 1006.34(b)(3)(iii).

34(b)(3)(iv)

The Bureau proposed in § 1006.34(b)(3)(iv) to permit debt collectors to use as the

itemization date the date of the transaction that gave rise to the debt. Proposed comment

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34(b)(3)(iv)–1 explained that the transaction date is the date that a creditor provided, or made

available, a good or service to a consumer, and it included examples of transaction dates. The

comment also explained that, if a debt has more than one potential transaction date, a debt

collector may use any such date as the transaction date but must use whichever transaction date it

selects consistently.

A number of commenters, including consumer advocates, industry trade groups, and at

least one industry commenter, supported including the transaction date in the itemization date

definition. According to several commenters, consumers likely would recognize the transaction

date as defined by proposed § 1006.34(b)(3)(iv). At least one commenter stated that creditors

provide account information as of the transaction date for some debt types.

With respect to proposed comment 34(b)(3)(iv)–1, a consumer advocate commenter

stated that, if a debt has more than one potential transaction date, the debt collector should not be

permitted to choose which date to use as the transaction date for purposes of § 1006.34(b)(3)(iv).

The commenter urged the Bureau to develop a prescriptive standard for identifying the

appropriate transaction date for scenarios where multiple transaction dates exist.

Several commenters also stated that determining the transaction date may be problematic

in some circumstances. For example, a consumer advocate commenter explained that, while

determining the transaction date is straightforward with one-time transactions, identifying the

transaction date may be more difficult with respect to contracts for ongoing services, such as

gym memberships, cellular telephone contracts, or lawn care service contracts. In addition, an

industry commenter stated that medical providers may combine multiple dates of service into

one account or use family billing that combines separate bills for family members into one

account. The commenter suggested that, if an account in collection reflects services on multiple

110

dates or for multiple individuals, identifying a transaction date may be difficult for the debt

collector.

The Bureau finds that, for some debts, creditors may provide debt collectors with account

information related to the transaction date. In addition, consumers may recognize the amount of

a debt on the transaction date, which may be reflected on a copy of a contract or a bill provided

by a creditor. For this reason, the Bureau is finalizing § 1006.34(b)(3)(iv) as proposed to provide

that the transaction date, which is the date of the transaction that gave rise to the debt, can be the

itemization date for purposes of § 1006.34(b)(3).

As commenters noted, various dates may serve as potential transaction dates under

§ 1006.34(b)(3)(iv). For example, potential transaction dates may include the date a service or

good was provided to a consumer or the date that a consumer signed a contract for a service or

good. In the case of a consumer’s tax debt, the date a government assessed the tax may be a

transaction date for purposes of § 1006.34(b)(3)(iv).

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Nevertheless, the Bureau declines to

adopt a prescriptive standard for identifying the only transaction date debt collectors may use.

Both the contract date and the service date are significant dates that may resonate with a

consumer. Because the consumer may recognize the amount of the debt on those dates, the

Bureau finds that either date may serve as the transaction date. Further, the Bureau determines

that developing a more prescriptive standard that would apply to all debt types is not feasible.

For this reason, the Bureau is finalizing comment 34(b)(3)(iv)–1, with minor changes for clarity,

to provide that, if a debt has more than one transaction date, a debt collector may use any such

date as the transaction date, but the debt collector must use whichever date the debt collector

selects consistently, as described in comment 34(b)(3)–1. Comment 34(b)(3)(iv)–1 also

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See the discussion of tax debts in the introductory section-by-section a nalysis of § 1006.34(b)(3).

111

addresses concerns regarding identifying the transaction date for medical debt that includes

services on multiple dates or for multiple individuals.

185

The Bureau recognizes that the transaction date may be difficult to determine in some

circumstances. However, under the framework in § 1006.34(b)(3) for determining the

itemization date, the transaction date is one of five reference dates from which a debt collector

may choose. Section 1006.34(b)(3) does not require a debt collector to use the transaction date

as the reference date for itemization-related disclosures. If a debt collector cannot determine the

transaction date, the debt collector may use another reference date.

34(b)(3)(v)

As discussed above, the proposed definition of itemization date included four reference

dates. In response to the proposed definition, an industry commenter suggested that the Bureau

add a fifth date—the date of a court judgment. The Bureau has determined to adopt this

recommendation. As a general matter, debt collectors will know if a court judgment against a

consumer exists and consumers are likely to recognize the date of a court judgment against them

or be able to verify the date with records. Further, the amount of the debt as of the date of a

court judgment is verifiable as it will have been memorialized in court records. Accordingly, the

Bureau is finalizing § 1006.34(b)(3)(v) to permit debt collectors to use as the itemization date the

judgment date, which is the date of a final court judgment that determines the amount of the debt

owed by the consumer.

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Because of differences between various debt types and the particular facts and circumstances of any given

transaction, § 1006.34(b)(3)(iv) provides debt collectors flexibility when selecting a transaction date. However, if

the total amount of a debt in collection includes amounts incurred on different dates of service, the Bureau believes

that, even though § 1006.34(b)(3)(iv) does not require it, debt collectors generally will select the last date of service

as the transaction date. This date may be most recognizable to consumers. Further, disclosing itemization-related

information as of the last date, as opposed to an earlier date, likely would be easier for a debt collector.

112

34(b)(4) Validation Notice

FDCPA section 809(a) provides, in relevant part, that, within five days after the initial

communication with a consumer in connection with the collection of any debt, a debt collector

shall send the consumer a written notice containing specified information (i.e., validation

information), unless that information is contained in the initial communication or the consumer

has paid the debt. Debt collectors and others commonly ref er to the written notice required by

FDCPA section 809(a) as a “validation notice” or a “g notice.” The Bureau proposed in

§ 1006.34(b)(4) to define validation notice to mean a written or electronic notice that provides

the validation information described in § 1006.34(c).

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The Bureau received no comments

regarding proposed § 1006.34(b)(4) and is finalizing it with a minor wording change for

consistency with final § 1006.34(c).

34(b)(5) Validation Period

FDCPA section 809(b) contains certain requirements that a debt collector must satisfy if

a consumer disputes a debt or requests the name and address of the original creditor.

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If a

consumer disputes a debt in writing within 30 days of receiving the validation information, a

debt collector must stop collection of the debt until the debt collector obtains verification of the

debt or a copy of a judgment against the consumer and mails it to the consumer. Similarly, if a

consumer requests the name and address of the original creditor in writing within 30 days of

receiving the validation information, the debt collector must cease collection of the debt until the

debt collector obtains and mails such information to the consumer. FDCPA section 809(b) also

prohibits a debt collector, during the 30-day period for written disputes and original-creditor

186

See 84 FR 23274, 23337 (May 21, 2019).

187

15 U.S.C. 1692g(b).

113

information requests, from engaging in collection activities and communications that

overshadow, or are inconsistent with, the disclosure of the consumer’s rights to dispute the debt

and request original-creditor information, which are sometimes referred to as “verification

rights.”

As described in the section-by-section analysis of § 1006.34(c)(3)(i) through (iii), the

Bureau proposed to require debt collectors to disclose to a consumer the date certain on which

the consumer’s verification rights under FDCPA section 809(b) expire. To facilitate compliance

with that proposed requirement, proposed § 1006.34(b)(5) defined the term validation period to

mean the period starting on the date that a debt collector provides the validation information

described in § 1006.34(c) and ending 30 days after the consumer receives or is assumed to

receive the validation information.

188

To clarify how to calculate the end of the validation

period—including how debt collectors may disclose a period that provides consumers additional

time beyond the required 30 days to exercise their validation rights—proposed § 1006.34(b)(5)

provided that a debt collector may assume that a consumer receives the validation information on

any day that is at least five days (excluding legal public holidays, Saturdays, and Sundays) after

the debt collector provides it. Proposed comment 34(b)(5)–1 clarified that, if a debt collector

sends an initial validation notice that was not received and then sends a subsequent validation

notice, the validation period ends 30 days after the consumer receives or is assumed to receive

the subsequent validation notice.

For the reasons discussed below, the Bureau is finalizing proposed § 1006.34(b)(5) and

proposed comment 34(b)(5)–1 (which is renumbered as comment 34(b)(5)–2) with minor

wording changes for clarity and consistency with other provisions of Regulation F. The Bureau

188

84 FR 23274, 23337-38 (May 21, 2019).

114

is adopting new comment 34(b)(5)–1 to illustrate how a debt collector may calculate the end of

the validation period before sending the validation notice.

A number of commenters, including industry commenters, supported proposed

§ 1006.34(b)(5). According to several commenters, the proposed definition is consistent with

current industry practices. For example, with respect to the proposed five-day delivery timing

assumption, industry commenters stated that debt collectors generally assume that a consumer

receives a validation notice five to eight days after mailing. Consumer advocate commenters

objected to the proposed definition, stating that debt collectors should be obligated to honor

consumer verification requests at any time, not only during the validation period.

Some commenters recommended lengthening the proposed five-day delivery timing

assumption. A consumer advocate commenter and an industry trade group commenter suggested

that the validation period definition should assume that the consumer receives the validation

notice seven days after the debt collector mails it to account for delays or bulk mail delivery.

189

Another trade group commenter recommended a fixed ten-day assumption that omits

consideration of weekends and holidays.

Other commenters recommended shortening the delivery timing assumption. For

example, an industry trade group commenter recommended that the Bureau eliminate the

assumption entirely and clarify that the validation period commences upon mailing of a

validation notice. Other industry commenters urged the Bureau to shorten the assumption for

near-instantaneous communication methods, such as electronic or oral delivery. In contrast, at

189

United Sta tes Postal Service (USPS) delivery times for Standard Mail, commonly referred to as bulk mail, a re

typically longer than delivery times for first-class mail. For example, based on the USPS Originating Service

Standards, bulk mail originated in Washington, DC takes six days to reach New York City, seven days to rea ch

Denver, and nine days to reach Seattle. By contrast, first-class mail from Wa shington, DC rea ches New York City

in two days and Denver and Seattle in three days. See U.S. Postal Serv., Service Standards Maps,

https://postalpro.usps.com/ppro-tools/service-standards-maps (la st visited Nov. 16, 2020).

115

least two industry trade groups commenters and a consumer advocate commenter recommended

a uniform validation period across delivery methods. According to an industry trade group

commenter, if the validation period is not the same for all delivery methods, consumers may be

confused if they receive validation notices through different delivery methods with different due

dates.

After considering this feedback, the Bureau determines that a validation period definition

will facilitate debt collectors’ compliance with the requirement in § 1006.34(c)(3) to disclose to a

consumer the date certain on which the consumer’s FDCPA section 809(b) verification rights

expire. The Bureau declines, as requested by consumer advocate commenters, to require a debt

collector to comply with a verification request that a consumer submits after the 30-day period

provided by the statute has expired. FDCPA section 809(b) establishes a 30-day period for

consumers to exercise their verification rights.

190

The Bureau also declines to modify the length of the five-day delivery timing

assumption. The Bureau proposed § 1006.34(b)(5) on the basis that a consumer typically

receives a validation notice no more than five days (excluding legal public holidays, Saturdays,

and Sundays) after the debt collector provides the notice. Based on its market monitoring

activities, the Bureau understands that debt collectors typically send consumer communications

by first-class mail, which generally is delivered in three business days or less.

191

The Bureau is

unaware that debt collectors typically use bulk mail to deliver validation notices, and

190

Although the FDCPA and this implementing regulation do not require a debt collector to provide verification

after the validation period expires, a debt collector nevertheless may choose to do so. The Bureau has received

feedback from debt collectors and at least one industry trade group that many debt collectors respond to disputes

with verifica tion, a nd to origina l-creditor-information requests, after the validation period has expired.

191

See U.S. Postal Serv., Service Standards Maps, https://postalpro.usps.com/ppro-tools/service-standards-maps

(la st visited Dec. 1, 2020).

116

commenters offered no evidence otherwise. For these reasons, the Bureau declines to extend the

five-day delivery timing assumption.

The Bureau also declines to shorten the validation period’s five-day delivery timing

assumption. The FDCPA’s 30-day validation period begins to run when the consumer receives

the validation information.

192

If the 30-day clock began to run upon the debt collector’s mailing

of the validation notice, as some commenters suggested, the consumer would be deprived of the

full 30-day period provided by the FDCPA to respond to the notice. Further, the Bureau declines

to shorten the length of the validation period for validation information provided by

communication methods such as electronic delivery. A delivery timing assumption that varied

by delivery method could pose compliance challenges and incentivize use of one communication

method over another. Therefore, as proposed, the five-day delivery timing assumption applies

uniformly to all validation information delivery methods.

A group of consumer advocates asked the Bureau to define the validation period based

solely on when the consumer is assumed to receive the validation information. In other words,

this commenter requested that the rule not permit the date that a consumer actually received the

validation notice to serve as the basis of the validation period. According to this commenter,

relying solely on the date that the consumer is assumed to receive the information would prevent

confusion if the date the consumer received the notice and the date the debt collector assumed

the consumer received it are different.

The Bureau declines to adopt this suggestion. The FDCPA’s 30-day validation period

begins to run when the consumer receives the validation information. Nevertheless, the Bureau

192

FDCPA section 809(a)(3) requires the validation notice to include “a statement that unless the consumer, within

thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be

assumed to be valid by the debt collector.” 15 U.S.C. 1692g(a)(3) (emphasis a dded).

117

determines that, at least in certain contexts, the date that the consumer is assumed to receive the

validation notice is the only date information that a debt collector will have at the time the

validation information is generated. Specifically, a debt collector who sends a written or

electronic validation notice will not know, at the time the notice is generated, the date on which

the consumer will receive the notice and, therefore, must be able to use the date of assumed

receipt to calculate the validation period end date. The Bureau is adding new comment

34(b)(5)−1 to clarify that, in such circumstances, debt collectors may rely on the date of assumed

receipt, even if they learn after sending the notice that the consumer received the validation

information on a different date.

Several industry and industry trade group commenters expressed concern about the use of

the term “legal public holiday” in proposed § 1006.34(b)(5). According to these commenters,

legal public holidays may include State and local holidays that the debt collector is not aware of

and cannot reasonably ascertain. In response to these concerns, and consistent with

§ 1006.22(c)(1) in the November 2020 Final Rule,

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the Bureau is revising § 1006.34(b)(5) to

provide that a debt collector may assume that a consumer receives the validation information on

any date that is at least five days (excluding legal public holidays identified in 5 U.S.C. 6103(a),

Saturdays, and Sundays) after the debt collector provides it.

Several industry commenters asked the Bureau to clarify whether a debt collector must

receive a consumer’s verification request before the validation period end date, or whether the

consumer need only send the request by the validation period end date for the request to be

effective. The Bureau determines that a consumer’s verification request—whether an original-

creditor information request or a dispute—is effective if the consumer sends or submits the

193

85 FR 76734, 76833-34, 76892 (Nov. 30, 2020).

118

request within the 30-day period established in § 1006.34(b)(5), even if the debt collector does

not receive the request until after the 30-day period. In specifying requirements for debt

collectors’ responses to consumers’ verification requests, § 1006.38(c) and (d)(2) of the Bureau’s

November 2020 Final Rule implemented FDCPA section 809(b) by providing that, upon receipt

of an original-creditor information request (§ 1006.38(c)) or a dispute (§ 1006.38(d)(2))

“submitted by the consumer in writing within the validation period, a debt collector must cease

collection of the debt . . . .” (emphasis added). The Bureau determines that a consumer’s

original-creditor information request or dispute has been “submitted by the consumer” for

purposes of § 1006.38(c) and (d)(2) if the consumer sends or submits the request within the 30-

day period established in § 1006.34(b)(5), even if the debt collector does not receive the request

until after the 30-day period.

For the reasons discussed above, the Bureau is adopting § 1006.34(b)(5) to provide that

validation period means the period starting on the date that a debt collector provides the

validation information and ending 30 days after the consumer receives or is assumed to receive

it. Section 1006.34(b)(5) also specifies that a debt collector may assume that a consumer

receives the validation information on any date that is at least five days (excluding legal public

holidays identified in 5 U.S.C. 6103(a) (i.e., federally recognized public holidays), Saturdays,

and Sundays) after the debt collector provides it.

Proposed comment 34(b)(5)–1 clarified that, if a debt collector sends a subsequent

validation notice to a consumer because the consumer did not receive the original validation

notice and the consumer has not otherwise received the validation information, the debt collector

must calculate the end of the validation period based on the date the consumer receives or is

assumed to receive the subsequent validation notice.

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At least two industry trade group commenters stated that proposed comment 34(b)(5)–1

was consistent with current industry practice. According to these commenters, if a validation

notice is returned as undeliverable, debt collectors typically send a new validation notice and

provide a new period for consumers to exercise their verification rights. A law firm commenter

asked the Bureau to provide additional guidance on a debt collector’s duties if a validation notice

is returned as undeliverable after the validation period has expired.

The Bureau concludes based on feedback received and its own market-monitoring,

supervision, and enforcement experience that proposed comment 34(b)(5)–1 is consistent with

existing industry practice and therefore is adopting it largely as proposed but renumbered as

comment 34(b)(5)–2. If a validation notice is returned as undeliverable after the validation

period has expired and the debt collector sends a subsequent notice, then, as stated in the

comment, the debt collector must calculate the end of the validation period based on the date the

consumer receives or is assumed to receive the subsequent validation notice.

34(c) Validation Information

Proposed § 1006.34(c) set forth the validation information that proposed § 1006.34(a)(1)

would have required debt collectors to disclose. The validation information consisted of four

general categories: information to help consumers identify debts (including the information

specifically referenced in FDCPA section 809(a)); information about consumers’ protections in

debt collection; information to facilitate consumers’ ability to exercise their rights with respect to

debt collection; and certain other statutorily required information. Each of those categories is

addressed separately in the section-by-section analysis of § 1006.34(c)(1) through (4).

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34(c)(1) Debt Collector Communication Disclosure

FDCPA section 807(11) requires a debt collector to disclose in its initial written

communication with a consumer—and, if the initial communication is oral, in that oral

communication as well—that the debt collector is attempting to collect a debt and that any

information obtained will be used for that purpose.

194

A debt collector must also disclose in each

subsequent communication that the communication is from a debt collector. If a debt collector

provides validation information, the debt collector engages in a debt collection communication

and must make an appropriate FDCPA section 807(11) disclosure.

195

The Bureau proposed to implement the FDCPA section 807(11) disclosures in

§ 1006.18(e).

196

In turn, the Bureau proposed in § 1006.34(c)(1) that the § 1006.18(e) disclosure

is required validation information. The Bureau finalized § 1006.18(e) in the November 2020

Final Rule.

197

Section 1006.18(e)(1) requires a debt collector to disclose in its initial

communication that the debt collector is attempting to collect a debt and that any information

obtained will be used for that purpose. Section 1006.18(e)(2) requires a debt collector to

disclose in each subsequent communication that the communication is from a debt collector.

At least one industry trade group supported proposed § 1006.34(c)(1)’s cross-reference to

the FDCPA section 807(11) requirement. A consumer advocate commenter asked the Bureau to

clarify what version of the FDCPA section 807(11) disclosure should appear on the validation

notice: the longer, initial disclosure described in § 1006.18(e)(1) or the shorter, subsequent

disclosure described in § 1006.18(e)(2).

194

See 15 U.S.C. 1692e(11).

195

See, e.g., Dorsey v. Morgan, 760 F. Supp. 509 (D. Md. 1991).

196

See 84 FR 23274, 23322-23, 23402 (May 21, 2019).

197

See 85 FR 76734, 76830-31, 76891-92 (Nov. 30, 2020).

121

The Bureau is adopting new comment 34(c)(1)–1 to clarify that a debt collector who

provides the validation notice required by § 1006.34(a)(1)(i)(A)—i.e., a debt collector who

provides the validation notice in the initial communication—complies with § 1006.34(c)(1) by

providing the disclosure described in § 1006.18(e)(1). The disclosure described in

§ 1006.18(e)(1) is broader than, and incorporates the content of, the disclosure described in

§ 1006.18(e)(2). Accordingly, new comment 34(c)(1)–1 also clarifies that a debt collector who

provides the validation notice required by § 1006.34(a)(1)(i)(B)—i.e., a debt collector who

provides the validation notice within five days of the initial communication—complies with

§ 1006.34(c)(1) by providing either the disclosure required by § 1006.18(e)(1) or the disclosure

required by § 1006.18(e)(2).

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The Bureau determines that this clarification will facilitate

compliance, encourage use of the model validation notice, and protect consumers.

The consumer advocate commenter also recommended that the Bureau require every

validation notice to include a Spanish translation of the FDCPA section 807(11) disclosure to

assist Spanish-speaking consumers. The Bureau declines to do so. Mandating that every debt

collector provide a Spanish translation of the disclosure is unnecessary for the majority of

consumers, who are not Spanish speakers. Further, a mandatory translation could undermine the

effectiveness of the other validation information disclosures. Moreover, the November 2020

Final Rule contained a targeted language access intervention on this topic. Pursuant to

§ 1006.18(e)(4) in that rule, debt collectors will be required to make the FDCPA section 807(11)

disclosure in the same language or languages used for the rest of the communication in which the

198

The model validation notice includes the disclosure required by § 1006.18(e)(1). As explained in the section-by-

section analysis of § 1006.34(d)(2), new comment 34(d)(2)(i)–1 clarifies that a debt collector who uses the model

notice to provide a validation notice as described in § 1006.34(a)(1)(i)(B) may replace the disclosure required by

§ 1006.18(e)(1) with the disclosure required by § 1006.18(e)(2) without losing the safe harbor provided by use of

the model notice.

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disclosures are conveyed. Thus, if a debt collector provides a consumer a validation notice in

Spanish pursuant to § 1006.34(e), the debt collector must include on that notice a Spanish

translation of the FDCPA section 807(11) disclosure.

Accordingly, the Bureau is finalizing § 1006.34(c)(1) as proposed and is finalizing new

comment 34(c)(1)–1 as described above.

34(c)(2) Information About the Debt

Proposed § 1006.34(c)(2) specified that certain information about the debt and the parties

related to the debt was required validation information.

199

The section-by-section analysis of

proposed § 1006.34(c)(2)(i) through (x) discussed the specific items of information, which were

designed to help consumers recognize debts and included existing disclosures. The Bureau

addresses comments related to specific disclosures in the section-by-section analysis of

§ 1006.34(c)(2)(i) through (x). In this section-by-section analysis, the Bureau addresses

comments related to § 1006.34(c)(2) more generally.

Some commenters supported proposed § 1006.34(c)(2). A consumer advocate and a

municipal government commenter stated that the proposed validation information would help

consumers determine whether they owe a debt. A group of State Attorneys General stated that

consumers today do not consistently receive the information they need to identify debts.

According to these commenters, consumers routinely submit complaints that they do not

recognize the debts or creditors disclosed on validation notices. An industry trade group stated

that it would be feasible for debt collectors to disclose the proposed information because debt

buyers routinely obtain such information at purchase.

199

84 FR 23274, 23338-42, 23404 (May 21, 2019). Proposed § 1006.34(c)(5) set forth a special rule for information

about the debt for certain residential mortgage debt.

123

Other commenters objected to proposed § 1006.34(c)(2) and suggested that consumers do

not need information beyond what the FDCPA expressly requires. An industry trade group

stated, without providing verifiable evidence, that most debts are valid and asserted that less than

one-half of 1 percent of debts lack a contractual basis or are miscalculated. According to this

commenter, the small number of debts that are problematic can be resolved by consumers

invoking their FDCPA verification rights.

Other commenters who objected to proposed § 1006.34(c)(2) cited industry burden. For

example, one industry commenter stated that requiring debt collectors to disclose the proposed

information about the debt and parties related to the debt would increase costs for debt collectors

as well as for creditors. Another industry commenter suggested that proposed § 1006.34(c)(2)

was not feasible because debt collectors rely on creditors for account information and records.

According to this commenter, if creditors did not provide the information, debt collectors would

be unable to comply with § 1006.34(c)(2).

Some commenters stated that the information proposed § 1006.34(c)(2) would require

might confuse consumers and questioned whether it was supported by the Bureau’s consumer

testing.

Some commenters recommended that the Bureau revise proposed § 1006.34(c)(2) to

require additional validation information. Federal government agency staff, a group of State

Attorneys General, and a government commenter suggested that the name of the original creditor

and the date of the original transaction should be required validation information. A group of

State Attorneys General suggested that the Bureau require debt collectors to provide information

about the debt as of the charge-off date. Two associations representing State regulatory agencies

recommended that the Bureau require disclosure of a debt collector’s State license or registration

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number, such as the Nationwide Multi-State Licensing System identification. According to these

commenters, requiring debt collectors to disclose license or registration information would assist

regulators examining for compliance with State debt collection laws. In addition, a consumer

advocate, an industry trade group, and an industry commenter recommended that, for medical

debt, validation information should include the facility name associated with the debt.

According to these commenters, a consumer may be more likely to recognize a facility where

treatment was provided than the name of the physician or healthcare provider to whom the

consumer owes the debt.

After considering the feedback, the Bureau has determined to finalize § 1006.34(c)(2).

The Bureau determines that validation notices in use today frequently lack sufficient information

about the debt and the parties related to the debt, and this lack of information undermines the

ability of consumers to determine whether they owe an alleged debt. This conclusion is

consistent with feedback from Federal and State government commenters, including the FTC and

a group of State Attorneys General. The Bureau’s testing also supports this conclusion.

200

The Bureau determines that requiring debt collectors to disclose the information about the

debt and parties related to the debt in § 1006.34(c)(2) is necessary. Industry commenters did not

support their claims about the relative infrequency of problematic debts with verifiable

evidence.

201

In addition, a group of State Attorneys General stated that consumers routinely

complain that they do not recognize debts being collected, and the Bureau’s complaint statistics

200

Certa in information that Bureau qualitative testing indicates helps consumers to recognize a debt—including a

debt’s original account number or an itemization of interest and fees—may not consistently appear on validation

notices. See FMG Cognitive Report, supra note 27, a t 8-11.

201

Even assuming one commenter’s claim that only one-half of 1 percent of debts lack a contractual basis or are

miscalculated, this error rate would impact hundreds of thousands of consumers annually. As the proposal noted,

49 million consumers are contacted by debt collectors every year. See 84 FR 23274, 23382 n.656 (May 21, 2019).

If one-half of 1 percent of these consumers received validation notices for debts they did not owe, 245,000

consumers could be impacted.

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indicate similar concerns about debts among consumers.

202

Thus, the Bureau is finalizing

§ 1006.34(c)(2) to require information about the debt and parties related to the debt.

The Bureau also determines that § 1006.34(c)(2) will not impose undue industry burden.

As discussed in part VII, while § 1006.34(c)(2) may increase some costs for debt collectors, as

well as cause some indirect costs for creditors, the Bureau does not expect these costs to be

substantial. The Bureau disagrees that a significant number of debt collectors will be unable to

comply with § 1006.34(c)(2). The Bureau acknowledges that debt collectors depend on creditors

to provide account information and that creditors will not be required by the final rule to provide

the information that § 1006.34(c)(2) will require. Notwithstanding this fact, the Bureau has

received feedback that many creditors today make available much of the information mandated

by § 1006.34(c)(2). To the extent that creditors do not already provide debt collectors with this

information, the Bureau determines that creditors will be incentivized to do so after

§ 1006.34(c)(2)’s effective date because the debt collectors they hire or sell debts to will be

unable to legally collect without it.

The Bureau determines that the information required by § 1006.34(c)(2) will not confuse

consumers. As discussed in part III.C, the Bureau has validated the model validation notice and

the validation information contained therein through four rounds of consumer testing.

The Bureau declines the recommendation to add certain disclosures to § 1006.34(c)(2).

First, the Bureau declines to require the name of the original creditor and the date of the original

transaction. Requiring this additional information on validation notices may overwhelm

consumers, may be repetitive, or may otherwise not add to consumer understanding because the

202

The most common debt collection complaint received by the Bureau continues to be about attempts to collect a

debt that the consumer reports is not owed. See 2020 FDCPA Annual Report, supra note 12, a t 14. Consumers may

report that a debt is not owed for a variety of reasons including, but not limited to, that the debt is being collected in

error or that the consumer does not recognize the debt.

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validation information already includes items such as the debt collector’s name

(§ 1006.34(c)(2)(i)), the name of the creditor to whom the debt was owed on the itemization date

(§ 1006.34(c)(2)(iii)), and the name of the creditor to whom debt is currently owed

(§ 1006.34(c)(2)(v)).

The Bureau also declines to tie information disclosure requirements to the date that a debt

was charged off because charge off is not relevant to all debt types. However, as discussed in the

section-by-section analysis of § 1006.34(b)(3)(ii), a debt collector may use the charge-off date as

the itemization date, in which case consumers will receive information about the amount of the

date as of the charge-off date, as well as information about interest, fees, payments, and credits

since that date.

203

The Bureau also declines to require a debt collector to disclose a State license or

registration number. If a debt collector is specifically required by applicable law to disclose such

information, a debt collector may do so as an optional disclosure under final

§ 1006.34(d)(3)(iv)(A).

The Bureau does agree that a facility name associated with a debt may be helpful to

consumers in the medical debt context. The Bureau is not modifying § 1006.34(c)(2) to require

this information, but final § 1006.34(d)(3)(vii) permits debt collectors to include facility name as

an optional disclosure.

Accordingly, as noted above, the Bureau is finalizing § 1006.34(c)(2) to require debt

collectors to provide certain information about the debt and the parties related to the debt.

Except with respect to final § 1006.34(c)(2)(iii), the Bureau is finalizing § 1006.34(c)(2)

pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the

203

See the section-by-section analysis of § 1006.34(c)(2)(vii) and (viii).

127

collection of debts by debt collectors and, as described more fully below, its authority to

implement and interpret FDCPA section 809. In addition, except with respect to final

§ 1006.34(c)(2)(v) and (ix), the Bureau is finalizing § 1006.34(c)(2) pursuant to its authority

under section 1032(a) of the Dodd-Frank Act, on the basis that the validation information

describes the debt, which is a feature of debt collection.

34(c)(2)(i)

FDCPA section 809(b) provides that a consumer may notify a debt collector in writing,

within 30 days after receipt of the information required by FDCPA section 809(a), that the

consumer is exercising certain verification rights, including the right to dispute the debt.

204

FDCPA section 809(a)(3) through (5), in turn, requires debt collectors to disclose how

consumers may exercise their verification rights. The proposal stated that to notify a debt

collector in writing that the consumer is exercising the consumer’s verification rights, the

consumer must have the debt collector’s name and address.

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Proposed § 1006.34(c)(2)(i)

therefore provided that the debt collector’s name and mailing address are required validation

information.

Industry and industry trade group commenters recommended various revisions to

proposed § 1006.34(c)(2)(i). First, some industry trade group commenters suggested that the

Bureau permit a debt collector to disclose a trade name or doing-business-as name (DBA), in lieu

of the debt collector’s legal name. According to these commenters, because a debt collector may

not use its legal name when communicating with consumers, a consumer may be more likely to

recognize the debt collector’s trade name or DBA.

204

15 U.S.C. 1692g(b).

205

84 FR 23274, 23339, 23404 (May 21, 2019).

128

Next, one industry trade group commenter recommended that the Bureau permit a debt

collector to disclose a vendor’s mailing address because some debt collectors do not receive mail

from consumers at their office locations and instead use letter vendors.

Finally, some industry and industry trade group commenters recommended that the

Bureau permit debt collectors to disclose multiple addresses. Some of these commenters stated

that debt collectors may use separate addresses for payments and other correspondence,

including disputes. For example, an industry trade group stated that some clients of debt

collectors, including the Department of Education, do not permit debt collectors to receive

payments at their office locations and instead require debt collectors to direct payments to a

“lockbox,” which is a post office box administered by a third party for the receipt of payments.

A consumer advocate asked the Bureau to modify proposed § 1006.34(c)(2)(i) to require

debt collectors to also disclose a telephone number, an email address, and any other method the

debt collector uses for consumer communications.

After considering the feedback, the Bureau is adopting § 1006.34(c)(2)(i) with a revision

for clarity and is also adopting two new comments to incorporate certain suggestions made by

commenters.

As noted, some commenters suggested that debt collectors who use multiple mailing

addresses be permitted to include more than one mailing address as validation information. The

Bureau declines to affirmatively permit the use of more than one mailing address as validation

information. As discussed in the proposal, the purpose of validation information is to facilitate a

consumer’s exercise of their rights in debt collection, namely, the right to dispute the debt or to

request original-creditor information. Accordingly, the mailing address included in the

validation information must be an address at which the debt collector accepts disputes and

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original-creditor information requests. The Bureau is revising § 1006.34(c)(2)(i) to affirmatively

state this requirement. If a debt collector only accepts payments at a different address than the

address at which it accepts disputes and original-creditor information requests, the Bureau notes

that the debt collector need not include payment disclosures with the validation information; they

are optional disclosures under § 1006.34(d)(3)(iii).

206

Moreover, if a debt collector omits the

optional payment disclosures, the validation notice will continue to contain contact information

for the debt collector, including, at the debt collector’s option, the debt collector’s telephone

number pursuant to § 1006.34(d)(3)(i), should the consumer wish to reach out for payment

information or to make a payment.

The Bureau is also adopting new comment 34(c)(2)(i)–1 to clarify that a debt collector

may disclose the debt collector’s trade name or DBA in lieu of the debt collector’s legal name.

The Bureau observes that, in some cases, a debt collector’s trade name or DBA may be more

recognizable to consumers than the debt collector’s legal name. The Bureau therefore

determines that a debt collector may use its trade name or DBA when communicating with

consumers. However, when disclosing a trade name or DBA, the debt collector may not do so in

a manner that violates the FDCPA section 807 prohibition on false or misleading representations.

For example, a debt collector may violate the FDCPA and this final rule if the debt collector

206

The Bureau also notes that nothing in Regula tion F prevents a debt collector from using a different mailing

address in communications that do not contain the validation information. For example, if a debt collector accepts

payments at a different address, the payment address may be included in a separate communication seeking

payment. Additionally, as noted at the outset of the section-by-section analysis of § 1006.34, the Bureau is not

fina lizing the proposed requirement that all va lidation notices be substantially sim ila r to the Bureau’s m odel

validation notice. Therefore, a debt collector may include a separate payment address on a validation notice, but a

debt collector who does so will not receive safe harbors pursuant to §§ 1006.34(d)(2) a nd 1006.38(b)(2) a nd m ust

otherwise comply with the FDCPA and Regulation F.

130

discloses a trade name or DBA that falsely represents or implies that the debt collector is an

attorney, when that is not the case.

207

Second, the Bureau is adopting new comment 34(c)(2)(i)–2 to clarify that a debt collector

may disclose a vendor’s mailing address, if that is an address at which the debt collector accepts

disputes and requests for original-creditor information. As one commenter observed, some debt

collectors may use a vendor to receive mail from consumers. The Bureau is finalizing comment

34(c)(2)(i)–2 to accommodate this business practice.

The Bureau declines to adopt the recommendation of some commenters to require debt

collectors to disclose other contact methods, including a telephone number or an email address.

The FDCPA does not require debt collectors to communicate by telephone or email. However,

as noted, § 1006.34(d)(3)(i) permits a debt collector to disclose the debt collector’s telephone

number. Likewise, § 1006.34(d)(3)(v)(A), permits a debt collector to disclose the debt

collector’s website and email address.

34(c)(2)(ii)

FDCPA section 809(a) requires debt collectors to disclose information about the debt that

helps consumers identify the debt and facilitates resolution of the debt. The proposal stated that,

like the information FDCPA section 809(a) expressly requires, the consumer’s name and address

is essential information about the debt that may help a consumer determine whether the

consumer owes a debt and is the intended recipient of a validation notice.

208

The Bureau

therefore proposed § 1006.34(c)(2)(ii) to provide that the consumer’s name and mailing address

207

See 15 U.S.C. 1692e(3).

208

84 FR 23274, 23339 (May 21, 2019).

131

is required validation information. As discussed below, proposed comment 34(c)(2)(ii)–1

clarified the meaning of the term “consumer’s name.”

A consumer advocate and an industry trade group expressed overall support for the

proposed provision. The consumer advocate stated that consumer name information would help

a consumer identify an alleged debt. The consumer advocate also stated that complete name

information—such as a first name, middle name, last name, and suffix—would help consumers

determine whether a debt collector is seeking a different consumer with a similar name.

According to the industry trade group, it would be unreasonable for a debt collector to omit

known name information. For the reasons discussed in the proposal, the Bureau is finalizing

§ 1006.34(c)(2)(ii) as proposed.

Proposed comment 34(c)(2)(ii)–1 clarified that the consumer’s name should reflect what

the debt collector reasonably determines is the most complete version of the name information

about which the debt collector has knowledge, whether obtained from the creditor or another

source. Proposed comment 34(c)(2)(ii)–1 further explained that a debt collector would not be

able to omit name information in a manner that would create a false, misleading, or confusing

impression about the consumer’s identity and provided an example.

Some commenters raised concerns about proposed comment 34(c)(2)(ii)–1. A number of

industry and industry trade group commenters objected to the statement that debt collectors

would be required to determine the most complete version of the name about which the debt

collector has knowledge, whether obtained from the creditor or another source. These

commenters stated that the reference to “another source” was ambiguous and would create

litigation risk and compel debt collectors to conduct open-ended research about a consumer’s

name. Several commenters urged the Bureau to omit the reference to “another source.”

132

The Bureau is finalizing comment 34(c)(2)–1 with revisions in response to feedback and

for clarity. First, the Bureau is deleting the phrase “whether obtained from the creditor or

another source.” This phrase is unnecessary as it does not alter the fundamental expectation that

a debt collector will disclose the most complete and accurate name about which the debt

collector has knowledge. In addition, the Bureau determines that the reference to “another

source” is ambiguous and may create unjustified litigation risk and industry burden.

Second, the Bureau is revising the comment to clarify that a debt collector must

reasonably determine “the most complete and accurate version” of a consumer’s name. The

Bureau intended that a debt collector would be required to disclose “accurate” consumer name

information, but proposed comment 34(c)(2)–1 only referred to “the most complete version” of

the consumer’s name. Finally, the Bureau has elaborated on the example of a debt collector

omitting a consumer’s name information.

34(c)(2)(iii)

209

FDCPA section 809(a)(2), which requires debt collectors to disclose to consumers the

name of the creditor to whom the debt is owed, typically is understood to refer to the current

creditor.

210

As the proposal stated, if the original creditor (or the creditor as of the itemization

date) and the current creditor are the same, a consumer is more likely to recognize the creditor’s

name. If they are different, however, a consumer may be less likely to recognize the current

creditor than the name of the creditor as of the itemization date. Proposed § 1006.34(c)(2)(iv)

provided that, if a debt collector is collecting a consumer financial product or service debt (as

209

Proposed § 1006.34(c)(2)(iii) generally provided that the merchant brand, if any, associated with a credit card

debt wa s required validation information. The Bureau is fina lizing m erchant brand information a s an optional

disclosure. See the section-by-section analysis of § 1006.34(d)(3)(vii). The Bureau therefore is fina lizing proposed

§ 1006.34(c)(2)(iv) through (x) as § 1006.34(c)(2)(iii) through (ix).

210

See 15 U.S.C. 1692g(a)(2). See the section-by-section analysis of § 1006.34(c)(2)(v).

133

that term was defined in proposed § 1006.2(f)), the name of the creditor to whom the debt was

owed on the itemization date is required validation information.

211

For the reasons discussed

below, the Bureau is finalizing proposed § 1006.34(c)(2)(iv) with minor wording changes and

renumbered as § 1006.34(c)(2)(iii), and is adopting new comment 34(c)(2)(iii)–1 to clarify that a

debt collector may disclose the trade name or DBA of the creditor to whom the debt was owed

on the itemization date.

An industry trade group commenter expressed support for requiring debt collectors to

disclose the creditor to whom the debt was owed on the itemization date but asked the Bureau to

clarify that a debt collector may disclose this creditor’s trade name or DBA, as opposed to its

legal name, which a consumer may not recognize.

A consumer advocate objected to the proposal because a consumer may not recognize the

creditor to whom the debt was owed on the itemization date. According to the commenter, in

some cases, the itemization date may have occurred years after the debt was incurred. And,

particularly if the debt was transferred before the itemization date, the consumer may not

recognize the creditor as of that date. As an alternative, the commenter suggested that a debt

collector be required to disclose the name of the original creditor.

As discussed in the section-by-section analysis of § 1006.34(c)(2)(i), an entity’s trade

name or DBA may be more recognizable to consumers than an entity’s legal name. It may be

appropriate for a debt collector to disclose a creditor’s trade name or DBA, in lieu of the

creditor’s legal name, when communicating with consumers. Thus, the Bureau is adopting new

comment 34(c)(2)(iii)–1 to clarify that a debt collector may disclose as validation information

the trade name or DBA of the creditor to whom the debt was owed on the itemization date.

211

84 FR 23274, 23404 (May 21, 2019).

134

The Bureau declines to require a debt collector to disclose the name of the original

creditor as validation information under § 1006.34(c). FDCPA section 809(a)(5) and (b) require

a debt collector to provide the name and address of the original creditor in response to a

consumer request. While the Bureau acknowledges that, in some cases, a consumer may not

recognize the creditor to whom the debt was owed on the itemization date, this information will

still benefit some consumers. For an older debt or a debt that has been transferred, consumers

may be more likely to recognize the creditor as of the itemization date than the current creditor.

Accordingly, the Bureau is finalizing § 1006.34(c)(2)(iii) to provide that, if the debt

collector is collecting debt related to a consumer financial product or service as defined in

§ 1006.2(f), the name of the creditor to whom the debt was owed on the itemization date is

required validation information. In addition, the Bureau is finalizing comment 34(c)(2)(iii)–1 to

clarify that a debt collector may disclose the trade name or DBA of the creditor to whom the debt

was owed on the itemization date.

34(c)(2)(iv)

The purpose of FDCPA section 809 is to “eliminate the recurring problem of debt

collectors dunning the wrong person or attempting to collect debts which the consumer has

already paid.”

212

Consistent with the FDCPA’s purpose, FDCPA section 809(a) requires debt

collectors to disclose to consumers certain information, such as the amount of the debt, to help

consumers identify debts. According to the proposal, an account number associated with a debt

on the itemization date may be integral information that a consumer uses to identify the debt.

213

The Bureau proposed § 1006.34(c)(2)(v) to provide that the account number, if any, associated

212

S. Rep. No. 382, supra note 57, a t 4.

213

84 FR 23274, 23340 (May 21, 2019).

135

with the debt on the itemization date, or a truncated version of that number, is required validation

information. Proposed comment 34(c)(2)(v)–1 explained that a debt collector may truncate an

account number provided that the account number remains recognizable. For the reasons

discussed below, the Bureau is adopting proposed § 1006.34(c)(2)(v), renumbered as

§ 1006.34(c)(2)(iv), and its related commentary with minor wording changes.

Industry commenters, a consumer advocate, and a group of State Attorneys General,

expressed overall support for proposed § 1006.34(c)(2)(v). However, one industry commenter

recommended that the Bureau exempt debt collectors collecting residential mortgage debt from

the requirement to disclose an account number. According to the commenter, the account

number for a residential mortgage that has had a servicing transfer may not be the current

account number, which might confuse consumers.

The Bureau concludes that an account number associated with a debt on the itemization

date may help some consumers recognize the debt. The Bureau declines to adopt the

recommendation to exempt debt collectors collecting residential mortgage debt from disclosing

an account number. As discussed in the section-by-section analysis of § 1006.34(b)(3), the

Bureau has determined that the reference dates that a debt collector may use to determine the

itemization date may be meaningful to consumers because they correspond to a notable event in

the debt’s history that consumers may recall or be able to verify with records. By extension, the

Bureau determines that an account number associated with a debt as of one of those dates will

also likely resonate with a consumer, even if it is not the current account number.

Accordingly, the Bureau is finalizing § 1006.34(c)(2)(iv) and its related commentary

largely as proposed, with only minor wording changes to the commentary for clarity. No

substantive change is intended.

136

34(c)(2)(v)

FDCPA section 809(a)(2) requires debt collectors to disclose to consumers the name of

the creditor to whom the debt is owed.

214

By using the present tense “is owed,” the statute

appears to refer to the creditor to whom the debt is owed when the debt collector makes the

disclosure.

215

The Bureau proposed § 1006.34(c)(2)(vi) to provide that the name of the current

creditor is required validation information. For the reasons discussed below, the Bureau is

finalizing the proposal, renumbered as § 1006.34(c)(2)(v), and is adopting new comment

34(c)(2)(v)–1 to clarify that a debt collector may disclose the trade name or DBA of the creditor

to whom the debt is currently owed, instead of its legal name.

The Bureau received no comments specifically addressing proposed § 1006.34(c)(2)(vi)

and is finalizing it as proposed but renumbered as § 1006.34(c)(2)(v). An industry trade group

commenter recommended that the Bureau permit debt collectors to disclose, along with the

required validation information, all current and past creditors associated with the debt.

According to the commenter, some creditors, such as healthcare and financial services providers,

may have multiple sub-entities with different corporate names. This commenter suggested that

disclosing more names of creditors will increase the likelihood that a consumer will recognize

one of them.

The Bureau declines to adopt this recommendation. Disclosing all current and past

creditors along with the validation information could overwhelm and confuse consumers.

216

214

See 15 U.S.C. 1692g(a)(2).

215

84 FR 23274, 23341 (May 21, 2019).

216

During one round of cognitive testing, participants were shown disclosure language that included a list of prior

creditors. Confusion was observed when participants tried to explain the difference between prior and current

creditors. The unclear relationship between creditors was highlighted when participants attempted to identify the

creditor that currently owned the debt. See FMG Cognitive Report, supra n ote 27, a t 3-4.

137

Thus, as discussed in the section-by-section analysis of § 1006.34(c), the Bureau is requiring

debt collectors to disclose as validation information only two creditors: the creditor to whom the

debt was owed on the itemization date (§ 1006.34(c)(2)(iii)) and the creditor to whom the debt is

currently owed (§ 1006.34(c)(2)(v)). Nothing in the final rule prohibits a debt collector from

including the name of another creditor on a validation notice, but a debt collector who does so

will not receive the § 1006.34(d)(2) safe harbor and will risk not complying with the

requirements of § 1006.34, including the § 1006.34(b)(1) clear and conspicuous standard.

As discussed in the section-by-section analysis of § 1006.34(c)(2)(i) and (iii), the Bureau

is finalizing new comments 34(c)(2)(i)–1 and 34(c)(2)(iii)–1 to clarify that a debt collector may

disclose an entity’s trade name or DBA, instead of its legal name. The Bureau concludes that it

is also appropriate to permit a debt collector to disclose the trade name or DBA of a current

creditor. Thus, the Bureau is adopting new comment 34(c)(2)(v)–1 to clarify that a debt

collector may disclose the trade name or a DBA of the creditor to whom the debt is currently

owed, instead of its legal name.

34(c)(2)(vi)

FDCPA section 809(a)(1) requires debt collectors to disclose to consumers the amount of

the debt.

217

In § 1006.34(c)(2)(viii), the Bureau proposed to interpret FDCPA section 809(a)(1),

and to use its authority under Dodd-Frank Act section 1032(a), to provide that the amount of the

debt on the itemization date is required validation information.

218

Consistent with proposed

§ 1006.34(c)(2)(viii), the Bureau proposed § 1006.34(c)(2)(vii) to provide that the itemization

date, as defined in § 1006.34(b)(3), also is required validation information. For the reasons

217

See 15 U.S.C. 1692g(a)(1).

218

84 FR 23274, 23341 (May 21, 2019).

138

discussed below, the Bureau is finalizing § 1006.34(c)(2)(vii) as proposed but renumbered as

§ 1006.34(c)(2)(vi).

Several commenters, including an industry commenter, an industry trade group

commenter, and a group of consumer advocates, stated that the itemization date may not be

meaningful to consumers or help them recognize debts, if disclosed without an explanation of its

relevance. These commenters, along with Federal government agency staff, recommended

requiring debt collectors to disclose with the itemization date a statement explaining which

reference date the debt collector used to determine that date.

219

The Bureau declines to adopt this recommendation. As discussed in the section-by-

section analysis of § 1006.34(b)(3), the Bureau determines that the reference dates that a debt

collector may use to determine the itemization date have a significant likelihood of being

meaningful to consumers because they correspond to notable events in a debt’s history that

consumers may recall or be able to verify with records. Because each of the reference dates may

be meaningful to consumers, the Bureau determines that no additional disclosure explaining their

relevance is necessary. Moreover, the Bureau determines that an additional disclosure

explaining the reference date may confuse or overwhelm some consumers. While a debt

collector likely could describe some reference dates (e.g., a last statement date) in a

straightforward manner, other reference dates (e.g., the charge-off date and the transaction date)

do not lend themselves to a succinct explanation. That is because some reference dates reflect

financial concepts that are inherently complex (i.e., charge off) or that could vary by debt type

and the facts and circumstances surrounding a particular debt (i.e., transaction dates). For such

219

As discussed in the section-by-section a nalysis of § 1006.34(b)(3), the Bureau defines itemization date to mean

one of five reference dates for which a debt collector can ascertain the amount of the debt.

139

reference dates, a statement explaining their relevance could distract or confuse consumers,

thereby undermining the efficacy of the other validation information.

34(c)(2)(vii)

As noted, FDCPA section 809(a)(1) requires debt collectors to disclose to consumers the

amount of the debt. As discussed in the proposal, the phrase “the amount of the debt” is

ambiguous; it does not specify which debt amount is being referred to, even though the debt

amount may change over time. As also discussed in the proposal, consumers may recognize the

amount of the debt as of the itemization date (as the Bureau proposed to define that term in

§ 1006.34(b)(3)). Because the amount of the debt on the itemization date may help a consumer

recognize a debt and determine whether the amount of a debt is accurate, the Bureau proposed to

interpret FDCPA section 809(a)(1), and to use its authority under Dodd-Frank Act section

1032(a), to provide in proposed § 1006.34(c)(2)(viii) that the amount of the debt on the

itemization date is required validation information.

220

Proposed comment 34(c)(2)(viii)–1

explained that this amount includes any fees, interest, or other charges owed as of the itemization

date.

An industry commenter questioned whether proposed § 1006.34(c)(2)(viii) would

significantly improve consumer understanding. According to the commenter, if a debt collector

determines the itemization date based on the last statement date pursuant to § 1006.34(b)(3)(i),

and if the debt is placed for collection shortly after the last statement was provided, the current

amount of the debt (which the Bureau proposed as a separate item of required validation

information) and the amount of the debt on the itemization date would be approximately the

220

84 FR 23274, 23341 (May 21, 2019). As proposed, the Bureau is fina lizing § 1006.34(c)(2)(ix) (renumbered

from proposed § 1006.34(c)(2)(x)) separately to provide that the current a mount of the debt also is required

va lida tion information.

140

same. The commenter stated that, in this scenario, disclosing the amount of the debt on the

itemization date would not benefit the consumer.

The Bureau acknowledges that, for a given debt, the amount owed on the itemization date

and the current amount of the debt may be similar or even the same. However, as discussed

below in the section-by-section analysis of final § 1006.34(c)(2)(viii), even in these cases, the

itemization of the debt will still be required, and, as clarified in final comment 34(c)(2)(viii)–1,

the itemization (if the amounts are the same) will show $0 in interest, fees, payments, and

credits. As such, it should be clear to the consumer why the two amounts are the same. In many

other cases, these amounts will differ, sometimes substantially. In these cases, the amount of the

debt on the itemization date will help consumers recognize or evaluate the debt.

For these reasons, the Bureau is finalizing § 1006.34(c)(2)(viii) and its related

commentary as proposed but renumbered as § 1006.34(c)(2)(vii).

34(c)(2)(viii)

As noted, FDCPA section 809(a)(1) requires a debt collector to disclose to consumers the

amount of the debt. As discussed, the Bureau proposed to implement and interpret FDCPA

section 809(a)(1) to provide that debt collectors must disclose to consumers both the amount of

the debt on the itemization date and the current amount of the debt (i.e., the amount of the debt

on the date that the validation information is provided).

221

In conjunction with the amount of the

debt on the itemization date and the current amount of the debt, the Bureau proposed

§ 1006.34(c)(2)(ix) to provide that an itemization of the current amount of the debt, in a tabular

format reflecting interest, fees, payments, and credits since the itemization date, is required

221

84 FR 23274, 23341 (May 21, 2019).

141

validation information. Proposed comment 34(c)(2)(ix)–1 clarified how debt collectors could

disclose that no interest, fees, payments, or credits were assessed or applied to a debt.

For the reasons discussed below, the Bureau is finalizing the proposal, renumbered as

§ 1006.34(c)(2)(viii), with revisions to permit debt collectors to disclose the itemization on a

separate page provided in the same communication with a validation notice, if the debt collector

includes on the validation notice, where the itemization would have appeared, a statement

referring to that separate page. The Bureau also is finalizing comment 34(c)(2)(ix)–1 with a

substantive modification and renumbered as comment 34(c)(2)(viii)–1, and is adopting new

comments 34(c)(2)(viii)–2 through–4 to clarify other aspects of final § 1006.34(c)(2)(viii).

Commenters offered differing opinions regarding proposed § 1006.34(c)(2)(ix). A group

of State Attorneys General, Federal government agency staff, consumer advocate commenters,

some industry trade group commenters, and at least one industry commenter supported the

proposed provision. These commenters generally agreed that an itemization of the debt would

help consumers recognize an alleged debt and understand how the debt had evolved over time

due to interest, fees, payments, and credits. Further, the Bureau received feedback that the

proposal was consistent with some industry practice. For instance, a commenter noted an

industry certification standard that, during the sales of certain debt types, requires debt buyers to

obtain or provide the unpaid balance due on the account, with a breakdown of the post-charge-

off balance, interest, fees, payments, and credits or adjustments.

222

The majority of industry and industry trade group commenters objected to proposed

§ 1006.34(c)(2)(ix). Some such commenters stated that the proposed itemization requirement

222

See Receivables Mgmt. Ass’n Int’l, Receivables Management Certification Program, at 41-45 (Mar. 1, 2020),

https://rmaintl.org/RMCP (la st visited Dec. 9, 2020).

142

would be burdensome. According to several industry commenters, debt collectors would either

have to manually access itemization information in creditor files or implement costly information

technology solutions to comply with the proposed requirement. Some industry commenters,

industry trade groups, and the SBA argued that the proposed requirement would impose burdens

on creditors. Commenters stated that some creditors may not maintain all of the itemization

information that the proposal would require or do not typically provide itemization information

at placement and that to do so would involve significant expense. Some commenters speculated

that, to avoid such costs, creditors might refer fewer accounts for collection or file more

collections lawsuits against consumers. The SBA, an industry trade group, and industry

commenters argued that compliance costs could be onerous for smaller creditors and debt

collectors. For the most part, commenters offered qualitative assessments of industry burden, but

one industry trade group did estimate that proposed § 1006.34(c)(2)(ix) would impose billions of

dollars in compliance costs on industry.

223

Some commenters stated that proposed § 1006.34(c)(2)(ix) is unnecessary or unhelpful.

Multiple industry commenters asserted that an itemization is superfluous because consumers can

exercise their FDCPA section 809 verification rights to receive more account information if

desired. With respect to medical debt, an industry trade group stated that proposed

§ 1006.34(c)(2)(ix) is unnecessary because the Internal Revenue Service (IRS) requires non-

profit hospitals to send letters with itemized information to consumers, and health insurance

companies routinely mail to responsible parties “Explanation of Benefits” documents that

223

One industry trade group estimated that a n itemization requirement would cost $600 m illion in professional f ees

to conduct legal analyses of HIPAA complia nce f or medical debt, $30 m illion f or one-time system reprogramming

for debt collectors, and $3 billion for one-time system reprogramming for creditors. The proposal a llegedly would

a lso result in billions of dolla rs in ongoing support costs and uncompensated medical care because, a ccording to the

commenter, the proposed requirement, if adopted, would increase the risks that hospitals might be unable to use debt

collectors.

143

provide details about coverage, payments, and co-pays. Some commenters expressed concern

that proposed § 1006.34(c)(2)(ix) could increase legal risk for debt collectors if the itemization

information confused consumers. At least one industry commenter stated that the Bureau’s

consumer testing did not support proposed § 1006.34(c)(2)(ix) because the testing did not

involve actual consumers assessing debts in a real-world setting.

A few industry commenters objected to proposed § 1006.34(c)(2)(ix) because the

FDCPA does not expressly require an itemization of the current amount of the debt.

Some industry and industry trade group commenters objected to proposed

§ 1006.34(c)(2)(ix) because the itemization that appears on the model validation notice is

formatted for a single debt. According to commenters, the proposal would not accommodate

debt collectors who combine multiple debts in a single validation notice. Several commenters

stated that not permitting debt collectors to include multiple debts in one validation notice would

dramatically increase the volume of mail sent to consumers and would require consumers to

exercise their verification rights for each individual debt in the event that a consumer has a

global dispute. Industry and industry trade group commenters stated that the inability to

combine multiple debts would be particularly challenging for medical debt collectors.

According to some commenters, healthcare providers routinely combine multiple debts, in part

because they utilize family billing, which involves combining the separate bills for family

members of a primary insured party. Commenters stated that itemizations for medical debt may

be further complicated by the fact that healthcare providers typically do not maintain a rolling

total of charges for a general service and instead individually bill for each good or service

provided. At least one trade group stated that student loan debt presents comparable itemization-

144

related challenges because student loan debt may be provided through multiple disbursements

with separate account numbers.

An industry trade group suggested that proposed § 1006.34(c)(2)(ix) would not

accommodate debts in bankruptcy. According to the commenter, the proposal did not have the

specificity necessary to account for how the Bankruptcy Code permits a debtor to cure pre-

bankruptcy defaults over the term of the bankruptcy plan while maintaining regular post-

bankruptcy payments. In addition, the commenter argued, the proposal would not accommodate

the nuances that arise in the context of certain bankruptcy scenarios, such as a cramdown plan or

a lien strip.

224

With regard to medical debt, industry commenters, an industry trade group, and the SBA

stated that healthcare providers might violate the Health Insurance Portability and Accountability

Act of 1996 (HIPAA)

225

Privacy Rule if they provided the proposed itemization.

226

According

to these commenters, proposed § 1006.34(c)(2)(ix) would require debt collectors to disclose

more information than the minimum necessary for treatment of the patient, payment of the bill,

or healthcare operations, in violation of HIPAA.

Commenters recommended various modifications to proposed § 1006.34(c)(2)(ix).

Industry and industry trade group commenters suggested that debt collectors should not need to

comply with proposed § 1006.34(c)(2)(ix) if interest and fees are not charged on an account.

227

224

Pursuant to 11 U.S.C. 1322(b)(5), a bankruptcy court may change the underlying terms of a debt, which is

referred to as a “cramdown.” Pursuant to 11 U.S.C. 1322(c)(2), a secured claim can be converted to an unsecured

cla im, which is ref erred to a s a “lien strip.”

225

Pub. L. 104-191, 110 Stat. 1936 (1996).

226

45 CFR pa rt 160 and part 164 subparts A and E.

227

In addition, an industry trade group suggested that debt collectors should not be required to comply with the

item iza tion requirement for pre-charge-off debts, particularly if periodic statements continue to be provided. The

145

An industry commenter stated that debt collectors should be permitted to indicate “U” for

“unknown” or “unavailable” in fields for which a creditor did not provide the relevant

information.

Several commenters asked the Bureau to clarify the proposal. An industry commenter

asked how a debt collector could disclose third-party payments or insurance adjustments,

particularly in the context of medical debt. An industry trade group sought additional guidance

about how to disclose balance increases that are not caused by interest or fees, such as a balance

increase caused by a returned payment. Noting the existence of validation notice itemization

requirements imposed by other applicable law, such as New York State regulations, two industry

trade groups requested guidance about how a debt collector should simultaneously comply with

those requirements and proposed § 1006.34(c)(2)(ix).

228

With respect to the Bureau’s request for comment about whether the proposed

itemization should be more detailed—for example, by reflecting each fee charged and each

payment received—or whether certain itemization categories should be combined as proposed,

industry commenters suggested that the Bureau not deviate from the proposal. For instance, a

commenter stated that, in the context of medical debts, listing all payments and credits

individually could result in multiple additional pages because of the number of third-party

payments. In contrast, citing the Bureau’s consumer testing, an academic commenter argued that

the itemization should be more detailed because consumers prefer to see penalties and fees

broken down into individual charges.

229

Bureau notes that, in many cases, a person collecting a debt that was not in default at the time it was obtained by

such person will not be a debt collector subject to the FDCPA or Regulation F. See FDCPA section 803(6)(F)(iii),

15 U.S.C. 1692a(6)(F)(iii).

228

See 23 NYCRR 1.2(b)(2).

229

FMG Sum mary Report, supra note 29.

146

After considering these comments, and for the reasons discussed below, the Bureau is

adopting the proposed requirement, renumbered as § 1006.34(c)(2)(viii), with revisions to

provide that validation information includes an itemization of the current amount of the debt

reflecting interest, fees, payments, and credits since the itemization date. Final

§ 1006.34(c)(2)(viii) further provides that a debt collector may disclose the itemization on a

separate page provided in the same communication with a validation notice, if the debt collector

includes on the validation notice, where the itemization would have appeared, a statement

referring to that separate page.

The Bureau determines that an itemization of the debt will help a significant number of

consumers recognize whether they owe a debt and evaluate whether the debt is accurate, because

the itemization will disclose how the amount may have changed over time due, for example, to

interest, fees, payments, and credits that have been assessed or applied to the debt.

The Bureau determines that § 1006.34(c)(2)(viii) will not create undue industry burden in

light of modifications made in response to comments.

230

The Bureau acknowledges that

complying with the itemization requirement may result in some additional costs to debt

collectors, particularly if they do not currently provide itemization information at placement or

on validation notices, as well as in some indirect costs to creditors. However, the Bureau

concludes that these costs will not substantially impact companies’ business operations because

the final rule provides sufficient flexibility to debt collectors to tailor the itemization to specific

business practices and types of debt. Accordingly, the Bureau does not conclude, as some

230

For example, as noted in the section-by-section analysis of § 1006.34(b)(3)(i), a creditor or a third-party servicer

acting on the creditor’s behalf may issue a statement even after the debt has gone into collection. In that case, under

§ 1006.34(b)(3)(i), that new statement may serve as the last statement for purposes of the itemization date.

147

commenters suggested, that the itemization requirement will result in creditors referring

significantly fewer accounts for collections or filing more lawsuits against consumers.

231

Although several commenters stated that the required itemization information may not be

available for every debt, the Bureau notes that the itemization of the debt is based on the type of

routine account information that debt collectors typically provide in response to consumer

verification requests and that, as such, debt collectors should be able to obtain such information

to comply with the final rule. While some debt collectors do not currently provide this itemized

information at the outset of collection communications, providing such itemization information

to consumers already is considered a best practice in some segments of the debt buying industry,

including for credit card debt and student loan debt.

232

Further, debt collectors are already

required to disclose an itemization for some types of debt in at least one jurisdiction, New York

State.

233

In addition, as discussed in the section-by-section analysis of § 1006.34(b)(3), the final

rule’s itemization date definition permits debt collectors to select an itemization date that is

feasible for the type of debt in collection and the information debt collectors receive. And

§ 1006.34(c)(2)(viii) requires itemization of fees, interest, and credits only subsequent to the

selected itemization date. Thus, for example, if a debt collector selects the last statement date as

231

An industry trade group cited a n a rticle to suggest that collection la wsuits nearly doubled in New York City since

2015 because of New York Sta te’s debt collection rules, which mandate an itemization.

See Yuka Hayashi, Debt

Collectors Wage a Comeback, Wall Street Journal (July 5, 2019). The Bureau notes that the article did not cite a

connection between higher rates of lawsuits and the itemization requirement. I nstead, the article discussed the

phenomenon of increasing lawsuits nationwide, including in Sta tes like Texas, which had not recently introduced a

significa nt debt collection rule.

232

See Receivables Mgmt. Ass’n Int’l, Receivables Management Certification Program, at 41-45 (Mar. 1, 2020),

https://rmaintl.org/RMCP (la st visited Dec. 9, 2020).

233

See 23 NYCRR 1.2(b) (requiring debt collectors to provide an itemized accounting of the debt within five days

a fter the initia l communication with a consumer in connection with the collection of certain types of charged-off

debt, such as credit card debt).

148

the itemization date under § 1006.34(b)(3), and if the creditor has recently issued a statement to

the consumer, the debt collector need only obtain and provide to the consumer an itemization

with fees, interest, and credits subsequent to that last statement date. And, as discussed in the

section-by-section analysis of § 1006.34(d)(2), a debt collector may provide the itemization on a

separate page and retain the safe harbor for the rest of the validation notice. For all of these

reasons, the Bureau concludes that the final rule will not impose undue burdens on debt

collectors and will provide consumers with useful information. The Bureau will monitor

whether the itemization date definition, including the last statement date definition, meets these

goals.

The Bureau disagrees that § 1006.34(c)(2)(viii) is unnecessary or unhelpful. The

verification rights afforded by FDCPA section 809 are an important statutory protection;

however, they do not serve the same purpose or provide an adequate substitute to the itemization

of the debt that § 1006.34(c)(2)(viii) will require. The Bureau disagrees that an itemization of

the current amount of the debt is unnecessary for medical debt, as some commenters argued.

Although some non-profit hospitals or insurance companies may provide itemization information

to some consumers, commenters did not suggest, and the Bureau is not aware of other evidence

indicating, that all consumers with medical debt receive itemization information such that

§ 1006.34(c)(2)(viii) would be unnecessary. The Bureau also disagrees with comments that an

itemization will confuse consumers. As the proposal noted, the Bureau’s qualitative consumer

testing indicates that an itemization improves consumer understanding about the debt.

234

The Bureau also disagrees that the FDCPA’s not expressly requiring an itemization is a

sufficient reason for the Bureau not to require it by rule. The Bureau proposed and is finalizing

234

See 84 FR 23274, 23341 (May 21, 2019); FMG Usa bility Report, supra note 28, a t 16-19.

149

the itemization requirement pursuant to its authority to interpret FDCPA section 809(a), as well

as pursuant to its authority under Dodd-Frank Act section 1032(a) to prescribe rules to ensure

that the features of debt collection are fully, accurately, and effectively disclosed to consumers.

The Bureau is revising § 1006.34(c)(2)(viii) to permit debt collectors to disclose the

itemization on a separate page.

235

The itemization that appears on the model validation notice

may not accommodate all debt types in every instance. Some debt collectors may have

legitimate reasons to combine multiple debts on a single validation notice. This may be the case

with respect to medical debt (for instance, owing to healthcare provider billing practices) and

student loan debt (because consumers may receive loans through multiple disbursements with

separate account numbers). As finalized, § 1006.34(c)(2)(viii) states that a debt collector may

disclose the itemization on a separate page provided in the same communication with a

validation notice, if the debt collector includes on the validation notice, where the itemization

would have appeared, a statement referring to that separate page.

236

New comment

34(c)(2)(viii)–3 clarifies that a debt collector may comply with the requirement to refer to the

separate page by, for example, including on the validation notice the statement, “See the

enclosed separate page for an itemization of the debt,” situated next to the information about the

current amount of the debt required by § 1006.34(c)(2)(ix).

237

235

Under § 1006.34(d)(2)(ii), a debt collector who otherwise uses the model validation notice or a substantially

sim ila r form, but who provides the itemization of the current amount of the debt on separate page, receives a saf e

harbor for compliance with the information and form requirements of § 1006.34(c) and (d)(1) except with respect to

the itemization that appears on the separate page.

236

For example, when delivering a validation notice by mail, a debt collector may include the separate itemization in

the sa me envelope a s the validation notice. Simila rly, when delivering a validation notice electronically, a debt

collector may include the separate itemization in the same email as the validation notice.

237

Section 1006.34(d)(2)(iii) establishes that a debt collector who uses the model validation notice and who provides

an itemization on a separate page receives a safe harbor for compliance with the information a nd form requirements

of § 1006.34(c) and (d)(1), except with respect to the disclosures that appear on the separate page.

150

The Bureau is making an additional change to § 1006.34(c)(2)(viii). As finalized,

§ 1006.34(c)(2)(viii) omits the proposed language that an itemization must be “in a tabular

format.” The Bureau determined that it is unnecessary and unwarranted to mandate the use of a

tabular format because, if the itemization information is provided on a separate page or orally,

using a tabular format may be impractical or infeasible and, if the itemization information is

provided on a validation notice, debt collectors likely will use the tabular format shown on the

model notice such that they may receive a safe harbor for compliance with the information and

form requirements of § 1006.34(c) and (d)(1).

To accommodate debt collectors who wish to combine multiple debts on a single

validation notice, the Bureau is adopting new comment 34(c)(2)(viii)–4 to clarify that a debt

collector who combines multiple debts on a single validation notice complies with

§ 1006.34(c)(2)(viii) by disclosing either a single, cumulative itemization on the validation

notice or a separate itemization of each debt on a separate page or pages provided in the same

communication as the validation notice.

238

The Bureau concludes that the itemization requirement will not cause healthcare

providers or debt collectors to violate the HIPAA Privacy Rule. HHS staff has advised the

Bureau that the HIPAA Privacy Rule generally permits covered entities to disclose protected

health information required by applicable law.

239

Because disclosure of itemization information

238

Rela tedly, as discussed in the section-by-section analysis of § 1006.34(c)(2)(ix), the Bureau is adopting new

comment 34(c)(2)(ix)–2 to clarify that a debt collector who combines multiple debts on a single va lidation notice

com plies with § 1006.34(c)(2)(ix)’s requirement to disclose the “current amount of the debt” by disclosing on the

va lida tion notice a single, cumulative figure that is the sum of the current amount of all the debts.

239

See 45 CFR 164.512(a)(1) (“A covered entity may use or disclose protected health information to the extent that

such use or disclosure is required by law and the use or disclosure complies with and is limited to the relevant

requirements of such law.”); see also U.S. Dep’t of Health & Human Servs., Does the HIPAA Privacy Rule prevent

health plans and providers from using debt collection agencies? Does the Privacy Rule conflict with the Fair Debt

Collection Practices Act?, https://www.hhs.gov/hipaa/for-professionals/faq/268/does-the-hipaa-privacy-rule-

151

will be necessary to comply with § 1006.34(c)(2)(viii), this guidance indicates that the HIPAA

Privacy Rule will permit its disclosure.

The Bureau declines to modify § 1006.34(c)(2)(viii) as commenters otherwise

recommended. An itemization, even if no interest and fees have been assessed or charged on an

account, remains relevant information about the debt. Further, complying with

§ 1006.34(c)(2)(viii) if no interest and fees have been assessed or charged is relatively

straightforward, and comment 34(c)(2)(viii)–1 clarifies how debt collectors may do so.

However, the Bureau is finalizing proposed comment 34(c)(2)(viii)–1 with a

modification to delete language stating that debt collectors may indicate “N/A” in a required

field when no interest, fees, payments, or creditors have been assessed or applied to the account

because different consumers may interpret “N/A” differently. For example, some consumers

might understand it as indicating “not available,” and others might construe it as meaning “not

applicable.” To eliminate this potential ambiguity, the Bureau is revising comment

34(c)(2)(viii)–1 to provide that a debt collector may indicate that the value of a required field is

“0,” “none,” or may state that no interest, fees, payments, or credits have been assessed or

applied to the debt. The Bureau also is revising the comment to clarify, as was intended in the

proposal, that a debt collector may not leave a required field blank.

The Bureau declines the recommendation that debt collectors be permitted to indicate

“U” for “unknown” or “unavailable” in the itemization if a creditor did not provide the relevant

information. Allowing debt collectors to omit specific itemization information in this manner

prevent-health-care-providers-from-usi ng-debt-collection-agencies/index.html (la st visited Dec. 1, 2020) (noting

that the H IPAA Privacy Rule permits healthcare providers to provide the minimum necessary patient information to

debt collectors for the purpose of receiving payment).

152

could incentivize debt collectors to avoid receiving it, thereby undermining the effectiveness of

§ 1006.34(c)(2)(viii).

Debt collectors sought clarification as to how they should comply with

§ 1006.34(c)(2)(viii) in various scenarios. Depending on the facts and circumstances, a third-

party payment or insurance adjustment may be disclosed as a “payment” or a “credit” in the

itemization. Also depending on the facts and circumstances, a payment that is returned may be

omitted from the itemization provided that the payment and the return offset each other, and

provided that the amount of the debt owed on the itemization date pursuant to

§ 1006.34(c)(2)(vii) and the current amount of the debt pursuant to § 1006.34(c)(2)(ix) are

accurately disclosed.

Regarding § 1006.34(c)(2)(viii)’s interaction with itemization requirements in other

applicable law, the Bureau is finalizing new comment 34(c)(2)(viii)–2, which states that, if a

debt collector is required by other applicable law to provide an itemization of the current amount

of the debt with the validation information, the debt collector may comply with

§ 1006.34(c)(2)(viii) by disclosing the itemization required by other applicable law in lieu of the

itemization described in § 1006.34(c)(2)(viii), if the itemization required by other applicable law

is substantially similar to the itemization that appears on the model validation notice. The

Bureau is aware of only one jurisdiction that requires debt collectors to provide an itemization

with the validation information, and that itemization is substantially similar to the itemization

required by § 1006.34(c)(2)(viii).

240

Further, consumers likely would not benefit—and, in fact,

may be disadvantaged—by receiving multiple itemizations with the validation information. For

instance, although a debt collector could include both the itemization required by

240

See 23 NYCRR 1.2(b)(2).

153

§ 1006.34(c)(2)(viii) on the front of a validation notice, and, on the reverse, an itemization

specifically required by other applicable law (as an optional disclosure pursuant to

§ 1006.34(d)(3)(iv)), a consumer would be unlikely to benefit from receiving two itemizations.

In addition, permitting debt collectors to simultaneously satisfy the Bureau’s itemization

requirement and a substantially similar requirement under other applicable law with one

itemization avoids burdening debt collectors with the costs of creating redundant disclosures.

The Bureau determines that the itemization of the current amount of the debt should not

be more detailed (e.g., it should not include a detailed list of all payments). The itemization that

appears on the model validation notice has been validated through four rounds of consumer

testing and is effective, and the Bureau agrees with commenters who observed that a detailed

disclosure of, for example, all payments could be overwhelming and not logistically feasible.

For all of these reasons, the Bureau is finalizing proposed § 1006.34(c)(2)(ix),

renumbered as § 1006.34(c)(2)(viii), to provide that required validation information includes an

itemization of the current amount of the debt reflecting interest, fees, payments, and credits since

the itemization date. Final § 1006.34(c)(2)(viii) also provides that a debt collector may disclose

the itemization on a separate page provided in the same communication with a validation notice

if the debt collector includes on the validation notice, where the itemization would have

appeared, a statement referring to that separate page. The Bureau is finalizing comment

34(c)(2)(ix)–1 with revisions and renumbered as comment 34(c)(2)(viii)–1 and is adding

comments 34(c)(2)(viii)–2 through –4 to clarify various aspects of final § 1006.34(c)(2)(viii), as

discussed above. The Bureau is finalizing § 1006.34(c)(2)(viii) and its related commentary

pursuant to its authority to interpret FDCPA section 809(a), as well as its authority under Dodd-

Frank Act section 1032(a).

154

34(c)(2)(ix)

FDCPA section 809(a)(1) requires debt collectors to disclose to consumers the amount of

the debt. Proposed § 1006.34(c)(2)(x) provided that the current amount of the debt is required

validation information.

241

Proposed comment 34(c)(2)(x)–1 explained that, for residential

mortgage debt subject to Regulation Z, 12 CFR 1026.41, a debt collector could comply with

§ 1006.34(c)(2)(x) by including in the validation notice the total balance of the outstanding

mortgage, including principal, interest, fees, and other charges.

Some commenters raised concerns about how proposed § 1006.34(c)(2)(x) would

disclose the current amount of the debt. Industry and industry trade group commenters stated

that, if interest and fees are increasing, the current amount of the debt that appears on a

validation notice may no longer be accurate by the time the consumer receives the notice. Some

commenters stated that some State laws and court decisions require debt collectors to disclose if

the current amount of the debt may change due to interest and fees.

242

To address these

concerns, industry and industry trade group commenters suggested that the Bureau should either

develop a stand-alone increasing-interest-and-fee disclosure or structure § 1006.34(c)(2)(x) to

permit debt collectors to disclose that the itemized current amount of the debt may increase or

decrease.

243

241

84 FR 23274, 23342, 23415 (May 21, 2019).

242

See Avila v. Riexinger & Assocs., LLC, 817 F.3d 72, 76 (2d Cir. 2016) (holding that 15 U.S.C. 1692e requires

debt collectors to disclose if the amount of a debt may increase due to interest and fees).

243

A trade group commenter recommended the following dynamic balance disclosure: “As of the date of this letter,

the balance due on the account is <current>. Because interest, fees, and/or other charges may change the total owed

from day to day, the amount due on the day you pay may be greater. If you pay the amount shown a bove, a n

adjustment may be necessary after we receive your payment, in which event you may be informed of any other

a m ount due.”

155

An industry trade group stated that disclosing the current amount of the debt as proposed

would present challenges for some reverse mortgage debt because that amount might differ from

the amount disclosed in monthly statements.

244

The commenter recommended that, to avoid

potential confusion in the context of reverse mortgage debt, a debt collector should be permitted

to provide the last monthly account statement in lieu of disclosing the current amount of the debt.

A group of consumer advocates recommended that, for residential mortgage debt, the

Bureau should require debt collectors to disclose the current amount of the total unpaid balance

owed as well as the arrearage owed. According to this commenter, the arrearage owed is

important information because, in many jurisdictions, homeowners in default can pay the

arrearage to stop a foreclosure and reinstate a mortgage.

After considering these comments, the Bureau is finalizing § 1006.34(c)(2)(x) as

proposed but renumbered as § 1006.34(c)(2)(ix). In addition, the Bureau is finalizing comment

34(c)(2)(x)–1 as proposed and is adopting new comment 34(c)(2)(ix)–2 to clarify how a debt

collector who combines multiple debts on a single validation notice complies with

§ 1006.34(c)(2)(ix).

With respect to interest and fee accrual when disclosing the current amount of the debt,

the Bureau declines to incorporate an increasing-interest-or-fee disclosure or to structure the

current amount of the debt as a dynamic balance in § 1006.34(c)(2)(ix). The Bureau notes,

however, that comment 34(c)(2)(ix)–1 (proposed as comment 34(c)(2)(x)–1) clarifies that the

current amount of the debt is the amount of the debt as of the date that the validation information

is provided. Therefore, a debt collector satisfies the requirement in § 1006.34(c)(2)(ix) without

244

The Bureau understands that, for some reverse m ortgages, including Home Equity Conversion Mortgages insured

by the FHA, when the reverse mortgage is due and payable, the amount due from the borrower may not be the

amount of outstanding debt because these reverse mortgages are non-recourse loans and a borrower will never owe

more than a portion of the appraised value of the home. See 24 CFR 206.125.

156

providing a dynamic balance or increasing-interest-or-fee disclosure. Additionally, as discussed

in the section-by-section analysis of § 1006.34(d)(3)(iv), the final rule affirmatively permits debt

collectors to include along with the required validation information other disclosures specifically

required by applicable law. As such, debt collectors may include a disclosure pursuant to a

judicial decision or order that the current amount of the debt may increase or vary due to interest,

fees, or other charges. This modification addresses the challenges debt collectors face related to

interest and fee accrual in disclosing the current amount of the debt.

The Bureau declines to permit debt collectors collecting reverse mortgage debt to include

a last monthly account statement in place of disclosing the current amount of the debt. Unlike

the special rule for certain residential mortgage debt discussed in the section-by-section analysis

of § 1006.34(c)(5), reverse mortgages are not generally subject to a separate disclosure

requirement, such as 12 CFR 1026.41(b)’s periodic statement requirement, that is functionally

equivalent to, or as useful to consumers as, certain disclosures required by § 1006.34(c)(2).

Reverse mortgages generally are exempt from providing periodic statements under the Truth in

Lending Act (TILA)

245

and its implementing Regulation Z.

246

While reverse mortgages may be

subject to a monthly statement requirement that would require entities to disclose the “total

outstanding loan balance,” this regulatory requirement is not as prescriptive as the Bureau’s

periodic statement requirement for other residential mortgage debt.

247

Thus, the Bureau

245

15 U.S.C. 1601 et seq.

246

See 12 CFR 1026.41(e)(1).

247

The regulation provides: “The mortgagee shall provide to the borrower a monthly statement regarding the a ctivity

of the mortgage for each month, as well as for the calendar year. The statement shall summarize the total principal

amount which has been paid to the borrower under the mortgage during that calendar year, the MIP paid to the

Com missioner a nd charged to the borrower, the total a mount of deferred interest added to the outstanding loa n

balance, the total outstanding loan balance, and the current principal lim it. The mortgagee shall include an

accounting of all payments for property charges. The statement shall be provided to the borrower monthly until the

157

determines that a last monthly statement for a reverse mortgage debt is not an adequate substitute

for § 1006.34(c)(2)(ix).

The Bureau declines to require debt collectors to separately disclose an arrearage owed

for residential mortgage debt. Because the Bureau did not propose this disclosure, it lacks the

benefit of public comment and concludes that additional information, including through public

comment, would be advisable before adopting any such interpretation. However, the Bureau

notes that a debt collector who utilizes the special rule for certain residential mortgage debt

described in § 1006.34(c)(5) to comply with § 1006.34(c)(2)(vi) through (viii) will provide a

periodic statement that may disclose such information.

248

Although a mortgage servicer is not

required to use the special rule for certain residential mortgage debt, a mortgage servicer who

does so and who otherwise uses the model validation notice or a substantially similar form

receives a safe harbor for compliance pursuant to § 1006.34(d)(2)(ii). The Bureau therefore

expects that, in many circumstances, a debt collector who is also a mortgage servicer that is

required to provide periodic statements under Regulation Z, 12 CFR 1026.41 will disclose

arrearage information.

As noted in the section-by-section analysis of § 1006.34(c)(2)(viii), industry commenters

requested further guidance about how to combine multiple debts on a single validation notice.

The Bureau is adopting new comment 34(c)(2)(ix)–2 to clarify that a debt collector who

combines multiple debts on a single validation notice complies with § 1006.34(c)(2)(ix) by

mortgage is paid in full by the borrower. The mortgagee shall provide the borrower with a new payment plan every

time it recalculates monthly payments or the payment option is changed. The statements shall be in a format

acceptable to the Commissioner.” See 24 CFR 206.203(a).

248

12 CFR 1026.41(d)(8)(vi) requires a periodic statement to include, if the consumer is more than 45 days

delinquent, the total payment amount needed to bring the account current.

158

disclosing on the validation notice a single, cumulative figure that is the sum of the current

amount of all the debts.

Proposed Provision Not Finalized

As discussed in the section-by-section analysis of § 1006.26(c), in the February 2020

proposal, the Bureau proposed to require debt collectors collecting time-barred debt to include

time-barred debt and revival disclosures on the validation notice.

249

Proposed

§ 1006.34(c)(2)(xi) provided that validation information included those disclosures, as

applicable, if the debt collector determined after a reasonable investigation that such disclosures

were required by § 1006.26(c).

250

For the reasons discussed in the section-by-section analysis of

§ 1006.26(c), the Bureau is not finalizing the proposed time-barred debt disclosure requirements

and, accordingly, the Bureau is not finalizing proposed § 1006.34(c)(2)(xi). However, as

discussed in the section-by-section analysis of § 1006.34(d)(3)(iv)(B), any disclosures relating to

time-barred debt that are specifically required by applicable law or that provide safe harbors

under applicable law are optional disclosures that the final rule affirmatively permits debt

collectors to include on the validation notice.

34(c)(3) Information About Consumer Protections

The disclosures in FDCPA section 809(a) help consumers to determine if a particular

debt is theirs and to facilitate action in response to the receipt of validation information.

However, as the proposal stated, debt collectors typically disclose only the information that

FDCPA section 809(a) specifically references and provide the FDCPA section 809 information

using statutory language, rather than plain language that consumers can more easily

249

See 85 FR 12672 (Mar. 3, 2020).

250

Id. at 12685, 12696.

159

comprehend.

251

To address these concerns, proposed § 1006.34(c)(3) provided that certain

information about a consumer’s rights with respect to debt collection is required validation

information. This information, which is discussed in the section-by-section analysis of

§ 1006.34(c)(3)(i) through (vi) below, included disclosures specifically referenced in FDCPA

section 809(a)(4) and (5), as well as additional disclosures intended to help consumers

understand their debt collection rights.

252

Commenters generally supported requiring debt collectors to disclose information about a

consumer’s rights with respect to debt collection. Federal government agency staff and a

consumer advocate commenter stated that proposed § 1006.34(c)(3) would improve consumers’

understanding of their rights in debt collection. Some industry and industry trade group

commenters supported using plain language disclosures to explain consumer protections in debt

collection.

Some commenters recommended that the Bureau require additional disclosures about

consumers’ rights with respect to debt collection. Federal government agency staff, a group of

28 State Attorneys General, and a number of consumer advocate commenters recommended that

debt collectors be required to disclose the FDCPA section 805(c) cease communication right.

253

A State regulatory agency recommended that the Bureau require debt collectors to disclose that a

consumer’s failure to act or to dispute a debt may have credit reporting implications. This

commenter also recommended that § 1006.34(c)(3) require debt collectors to disclose how

251

84 FR 23274, 23342 (May 21, 2019).

252

See 15 U.S.C. 1692g(a)(4) and (5).

253

In the November 2020 Final Rule, the Bureau finalized § 1006.6(c)(1) to implement FDCPA section 805(c) and

to provide that, “if a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the

consumer wants the debt collector to cease further communication with the consumer, the debt collector must not

communicate or attempt to communicate further with the consumer with respect to such debt.” 85 FR 76734, 78889

(Nov. 30, 2020).

160

consumers may obtain an annual credit report, which consumers are entitled to under the FCRA

and its implementing Regulation V.

254

The Bureau determines, as discussed in the proposal, that consumers will benefit from

receiving additional information about their rights in debt collection and from plain language

disclosures rather than disclosures that parrot the FDCPA’s statutory text.

255

The Bureau

therefore is adopting § 1006.34(c)(3). Specifically, as discussed further in the section-by-section

analysis below, the Bureau is adopting § 1006.34(c)(3)(i) through (v) and its related commentary

with minor modifications, but is not finalizing proposed § 1006.34(c)(3)(vi), which addressed the

opt-out notice required by § 1006.6(e) for electronic communications or attempts to

communicate.

The Bureau declines to require additional disclosures about consumer protections in debt

collection, as some commenters suggested. In particular, the Bureau concludes that, although

consumers may benefit from understanding the rights the commenters discussed, those rights are

not sufficiently related to the purposes of FDCPA section 809—i.e., helping consumers to

determine if a debt is theirs and to facilitate action in response to the receipt of validation

information—to require debt collectors to include them as validation information.

256

In addition,

as discussed in the section-by-section analysis of § 1006.34(c)(3)(iv), the final rule generally

requires debt collectors to include a statement that informs consumers that additional information

regarding consumer protections in debt collection is available on the Bureau’s website, with a

254

See 15 U.S.C. 1681j(a); 12 CFR 1022.136.

255

84 FR 23274, 23342 (May 21, 2019).

256

For exa mple, when Congress established the cease communication right pursuant to FDCPA section 805(c),

Congress did not require its disclosure pursuant to FDCPA section 809. The Bureau concludes that wa s intentional.

Thus, the Bureau declines to include the cease communication right as validation information that debt collectors

must disclose.

161

link to the information.

257

The Bureau’s website will disclose more information about consumer

protections in debt collection, including about the cease communication right.

The Bureau is finalizing § 1006.34(c)(3)(i) through (iii) and (v) pursuant to its authority

under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt

collectors and, as described more fully below, its authority to implement and interpret FDCPA

section 809. The Bureau also is finalizing § 1006.34(c)(3) pursuant to its authority under section

1032(a) of the Dodd-Frank Act, on the basis that a consumer’s rights are a feature of debt

collection.

34(c)(3)(i)

FDCPA section 809(a)(4) requires debt collectors to disclose to consumers their right

under FDCPA section 809(b) to dispute the validity of the debt within 30 days after receipt of the

validation information (i.e., during the validation period).

258

If a consumer disputes a debt in

accordance with FDCPA section 809(b), a debt collector must cease collecting the debt until the

debt collector provides verification to the consumer; this is sometimes referred to as the

collections pause. FDCPA section 809(a)(4) does not expressly indicate that a debt collector

must disclose to consumers that a dispute triggers FDCPA section 809(b)’s collections pause, or

whether a debt collector must disclose the end date of the validation period.

The Bureau proposed § 1006.34(c)(3)(i) to provide that validation information includes a

statement that specifies the end date of the validation period and states that, if the consumer

notifies the debt collector in writing before the end of the validation period that the debt, or any

257

Section 1006.34(c)(3)(iv) requires debt collectors to include the disclosure if they are collecting debt related to a

consumer financial product or service, as defined in § 1006.2(f). Otherwise, debt collectors ca n optionally include

the disclosure under § 1006.34(d)(3)(viii).

258

See 15 U.S.C. 1692g(a)(4).

162

portion of the debt, is disputed, the debt collector must cease collection of the debt until the debt

collector sends the consumer either the verification of the debt or a copy of a judgment.

259

The Bureau received a variety of comments in response to proposed § 1006.34(c)(3)(i)’s

incorporation of the validation period end date.

260

On the one hand, an industry trade group and

a group of consumer advocate commenters supported the inclusion, asserting the validation

period end date would provide certainty to consumers about the timeframe within which to

exercise their verification rights.

However, other commenters opposed the inclusion because, if delivery of a validation

notice is delayed and the consumer receives the notice later than the debt collector presumed, the

validation period end date would be inaccurate. Commenters suggested this could pose legal risk

to debt collectors. To address this concern, an industry commenter recommended that the

Bureau modify proposed § 1006.34(c)(3)(i) to replace the validation period end date with a

generic statement that a consumer may request verification within 30 days after receiving the

validation notice.

Some commenters, including consumer advocate commenters and an industry trade

group, stated that disclosing the validation period end date might leave consumers with the false

impression that they could not raise concerns about a debt after the validation period expires. A

group of academic commenters argued that a study suggested that a significant number of

consumers believed that, if they did not dispute a debt during the validation period, they would

259

84 FR 23274, 23343, 23404 (May 21, 2019).

260

The discussion under the “Model Va lidation Notice” heading in the section-by-section analysis of

§ 1006.34(d)(2) provides details about how the statement required by § 1006.34(c)(3)(i) is disclosed on the model

va lida tion notice.

163

be unable to assert later that they did not owe the debt.

261

Similarly, an industry commenter

stated that disclosing the validation period end date might dissuade consumers from making

verification requests after that date even though debt collectors sometimes honor such requests.

To address this potential misunderstanding, some commenters recommended that the final rule

require debt collectors to inform consumers that they can raise concerns about a debt after the

validation period end date.

Commenters also addressed the Bureau’s proposal to require debt collectors to disclose

FDCPA section 809(b)’s collections pause. Federal government agency staff and a group of

consumer advocate commenters supported the collections pause disclosure. However, industry

commenters stated that the disclosure would be burdensome because it would encourage

consumers to dispute the debt for the purpose of delaying or avoiding debt collection. According

to an industry commenter, consumers do not need to be informed about FDCPA section 809(b)’s

collections pause because debt collectors are aware of it and observe it.

The Bureau determines that consumers will benefit from § 1006.34(c)(3)(i)’s disclosure

of the validation period end date. As discussed in the proposal, the validation period end date is

an integral feature of consumers’ dispute right. Among other things, the validation period end

date will provide certainty to consumers about the timeframe provided by the FDCPA to exercise

their verification rights.

The Bureau disagrees that a validation period end date that is inaccurate because a

validation notice was delayed will present significant legal risk to debt collectors. Final

§ 1006.34(b)(5) and comment 34(b)(5)–1 provide that, for purposes of determining the end of the

261

Jeff Sovern & Ka te Walton, Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding

of Debt Collection Validation Notices, 70 SMU L. Rev. 63, 128 (2017) (“Our study indicated that more than a third

of the respondents believed that if they failed to meet the thirty-day deadline, they would either have to pay a debt

they did not owe or would not be able to argue in court that they didn’t owe the debt.”).

164

validation period, a debt collector who provides the validation information in writing or

electronically may assume that a consumer receives the validation information on any date that is

at least five business days after the debt collector provides it. If a debt collector calculates the

validation period end date in accordance with this presumption, the debt collector will not violate

the FDCPA or its implementing Regulation F, even if, as final comment 34(b)(5)–1 clarifies, the

consumer receives the validation notice later than the debt collector assumed. Further, the

Bureau determines that a generic statement that a consumer may request verification within 30

days after receiving the validation notice is not an adequate substitute for disclosing the

validation period end date. Such a generic statement could leave many consumers unsure about

when the validation period ends. For example, consumers might receive a validation notice in

the mail but not open it immediately, or they might open it and return to it later without keeping

track of how much time has passed. In these and similar scenarios, consumers would not be able

to determine the validation period end date.

Regarding commenters’ suggestion that the Bureau require debt collectors to inform

consumers that they can raise concerns about a debt after the validation period end date, the

Bureau concludes that it is not necessary to require such a disclosure. FDCPA section 809(a)

requires specific consumer disclosures, including statements about the consumer’s rights within

30 days of receipt of the notice, but does not require any additional statement addressing

consumer actions after the expiration of that period. The Bureau determines that a specific end

date will not increase consumer confusion more than general language such as “within 30 days.”

The Bureau’s testing shows that, while some confusion does occur, about 40 percent of

165

participants said they could still dispute the debt after the validation period end date.

262

Of the

remaining 60 percent of participants, about 40 percent were unclear what would happen if they

wrote to dispute the debt, and only about 20 percent specifically said that they could not write to

dispute the debt.

263

When asked whether the debt collector would be required to send

information saying they owe the debt if they wrote to dispute after the validation period end date,

a small majority of consumers assumed that the debt collector would be required to do so.

264

Thus, although consumers may not be certain of the effect of writing to dispute the debt after the

validation period end date, the Bureau’s testing indicates that a sizeable majority of consumers

would not be inhibited about raising general concerns about the debt after the validation notice

end date. As discussed above, the final rule’s enhanced and plain-language disclosures should

improve overall consumer understanding and empower consumers to respond, should they

choose, to debt collectors. The Bureau therefore declines to require as part of the validation

information an explicit statement informing consumers that they may continue to raise concerns

about the debt after the validation period end date.

The Bureau also determines that § 1006.34(c)(3)(i) should not omit the collections pause

disclosure. As the proposal noted, consumer testing indicates that knowing about the collections

pause was important to consumers and would encourage them to exercise their dispute right if

they questioned a debt’s validity.

265

Debt collectors have not provided evidence to support the

premise that a significant number of consumers exercise their FDCPA section 809 verification

262

See November 2020 Qualitative Testing Report, supra note 34, at 13. Simila rly, the Bureau’s prior testing

suggested that “[o]verall, participants’ comments suggest that they understood the difference between writing before

the specified date [and] writing after that date.” FMG Usability Report, supra note 28, a t 56.

263

Id.

264

Id. at 13-14.

265

FMG Cognitive Report, supra note 27, a t 30; see also FMG Summary Report, supra note 29, a t 25.

166

rights solely to evade or delay paying debts that they owe. Absent such evidence, the Bureau

declines to conclude that consumers will exercise their rights for such purposes. Further,

regardless of whether debt collectors are aware of and comply with FDCPA section 809(b)’s

collections pause requirement, the Bureau concludes that consumers will benefit from this

disclosure because it will provide them with more complete information about the actions that

debt collectors must take if consumers notify them that the debt is disputed.

For all of these reasons, the Bureau is finalizing § 1006.34(c)(3)(i) as proposed, with

minor wording changes to clarify the content of the required disclosure, including by specifying

that the consumer must notify the debt collector in writing “on or before” the end of the

validation period, as opposed to “before” the end of the validation period, as proposed.

266

34(c)(3)(ii)

FDCPA section 809(a)(5) requires debt collectors to disclose to consumers their right

under FDCPA section 809(b) to request, within 30 days after receipt of the validation

information, the name and address of the original creditor, if different from the current

creditor.

267

FDCPA section 809(a)(5) does not expressly indicate that a debt collector must

disclose to consumers that an original-creditor information request invokes FDCPA section

809(b)’s collections pause, or whether a debt collector must disclose the end date of the

validation period. The Bureau proposed § 1006.34(c)(3)(ii) to provide that validation

information includes a statement that specifies the end date of the validation period and states

that, if the consumer requests in writing before the end of the validation period the name and

address of the original creditor, the debt collector must cease collection of the debt until the debt

266

The model validation notice uses the term “by” instead of “on or before” for pla in la nguage purposes.

267

See 15 U.S.C. 1692g(a)(5).

167

collector sends the consumer the name and address of the original creditor, if different from the

current creditor.

268

Some industry and industry trade group commenters recommended that the Bureau not

finalize proposed § 1006.34(c)(3)(ii).

269

Some commenters stated that the validation information

need not include a statement informing consumers of their right to request original-creditor

information because, under the Bureau’s rule, the validation information will include the creditor

as of the itemization date and, according to the commenters, that creditor and the original

creditor often will be the same. Relatedly, some commenters suggested that, because the

validation information will include the names of the itemization-date creditor and the current

creditor, debt collectors should be permitted to omit the statement informing consumers of their

right to request original-creditor information if the original creditor is the same as either of those

creditors.

270

Some commenters recommended that the Bureau modify proposed § 1006.34(c)(3)(ii) to

omit the validation period end date and the collections pause disclosures. These comments were

substantially similar to comments discussed in the section-by-section analysis of

§ 1006.34(c)(3)(i).

After considering the feedback, the Bureau has determined to finalize § 1006.34(c)(3)(ii).

FDCPA section 809(a)(5) expressly requires debt collectors to include in the validation

information a statement that, upon the consumer’s written request within 30 days after receipt of

268

84 FR 23274, 23343, 23404 (May 21, 2019).

269

See the “Model Va lidation Notice” discussion in the section-by-section a nalysis of § 1006.34(d)(2) for a dditional

details about how the statement required by § 1006.34(c)(3)(ii) is disclosed on the model validation notice.

270

As a n a lternative to complying with § 1006.34(c)(3)(ii), an industry trade group commenter recommended that

debt collectors be permitted to proactively disclose the original-creditor information that a consumer would receive

in response to an FDCPA section 809(b) request. This comment is addressed in the section-by-section a nalysis of

§ 1006.38.

168

the validation information, the debt collector will provide the consumer with the name and

address of the original creditor, if different from the current creditor. The Bureau proposed

§ 1006.34(c)(3)(ii) to implement that requirement and to clarify the content of the disclosures for

debt collectors. The Bureau did not propose an exception to this disclosure requirement if the

original creditor and the current creditor are the same and therefore does not have information

regarding the costs or benefits of finalizing such an exception. To the extent that commenters

were concerned about the burden of responding to original-creditor information requests when

the original creditor and the current creditor are the same, the Bureau is finalizing a special rule

for that scenario in § 1006.38(c)(2).

271

For these reasons, the Bureau is finalizing

§ 1006.34(c)(3)(ii) as proposed, with minor wording changes to clarify the content of the

required disclosure, including by specifying that the consumer must notify the debt collector in

writing “on or before” the end date of the validation period, as opposed to “before” the end of the

validation period, as proposed.

272

The Bureau declines to omit the validation period end date and the collections pause

disclosures from § 1006.34(c)(3)(ii) for the same reasons discussed in the section-by-section

analysis of § 1006.34(c)(3)(i).

34(c)(3)(iii)

FDCPA section 809(a)(3) requires a debt collector to disclose to a consumer that, unless

the consumer disputes the validity of the debt within 30 days of receipt of the validation

information, the debt collector will assume the debt to be valid.

273

The Bureau proposed

§ 1006.34(c)(3)(iii) to provide that validation information includes a statement that specifies the

271

See the section-by-section analysis of § 1006.38(c)(2).

272

The model validation notice uses the term “by” instead of “on or before” for pla in la nguage purposes.

273

15 U.S.C. 1692g(a)(3).

169

end date of the validation period and states that, unless the consumer contacts the debt collector

to dispute the validity of the debt, or any portion of the debt, before the end of the validation

period, the debt collector will assume that the debt is valid.

274

At the time of the proposal, courts in various jurisdictions had reached different

conclusions about whether FDCPA section 809(a)(3) requires debt collectors to recognize oral

disputes about the validity of a debt.

275

These differing decisions principally arose from the fact

that, whereas FDCPA section 809(a)(4) and (5) explicitly state that a consumer must notify a

debt collector in writing, FDCPA section 809(a)(3) does not refer to a writing requirement. In

the absence of an express writing requirement in FDCPA section 809(a)(3), the majority of

circuit courts that considered the issue had determined that a consumer’s oral dispute triggers

certain FDCPA protections, including, for example, FDCPA section 810’s payment application

requirement.

276

Consistent with this majority position, and pursuant to its authority to implement

and interpret FDCPA section 809(a)(3) as well as its authority under Dodd-Frank Act section

1032(a), the Bureau proposed to interpret FDCPA section 809(a)(3) to allow oral disputes.

277

274

84 FR 23274, 23343-44, 23404 (May 21, 2019).

275

Compare Clark v. Absolute Collection Serv., Inc., 741 F.3d 487, 490 (4th Cir. 2014) (per curiam) (holding that

oral disputes trigger certain FDCPA protections, including under FDCPA section 809(a)(3)), Hooks v. Forman,

Holt, Eliades & Ravin, LLC, 717 F.3d 282, 286 (2d Cir. 2013) (same), and Camacho v. Bridgeport Fin. Inc., 430

F.3d 1078, 1082 (9th Cir. 2005) (same), with Graziano v. Harrison, 950 F.2d 107, 112 (3d Cir. 1991) (“[A] dispute,

to be effective, must be in writing.”).

276

FDCPA section 810 is implemented by § 1006.30(c). See 85 FR 76734, 76843 (Nov. 30, 2020); see also

Camacho, 430 F.3d at 1081-82 (holding that oral disputes trigger certain FDCPA protections, including under

FDCPA sections 807(8) and 810).

277

After the proposal was published, the circuit split was resolved. In Riccio v. Sentry Credit, Inc., the Third Circuit

sitting en banc overruled its prior decision a nd determined that FDCPA section 809(a)(3) does not require a dispute

to be in writing. Riccio v. Sentry Credit, Inc., 954 F.3d 582, 594 (3d Cir. 2020) (en banc) (“In short, we conclude

that debt collection notices sent under § 1692g need not require that disputes be expressed in writing. In doing so,

we overrule Graziano’s contrary holding.”).

170

Industry commenters, industry trade group commenters, and a group of academic

commenters supported the Bureau’s proposed interpretation that FDCPA section 809(a)(3)

permits consumers to dispute the validity of a debt orally or in writing.

Several industry and industry trade group commenters expressed concerns about how

proposed § 1006.34(c)(3)(iii) was disclosed on the proposed model validation notice, perceiving

a tension between the regulatory text and the proposed model notice text. Specifically, whereas

the proposed model validation notice stated that a consumer may “call or write” to dispute all or

part of the debt, proposed § 1006.34(c)(3)(iii) did not specify the manner in which a consumer

must contact the debt collector and instead used the general term “contact.”

As proposed, the Bureau determines that FDCPA section 809(a)(3) permits both oral and

written disputes. The Bureau agrees with every circuit court that has addressed this issue and

interprets the absence of a reference to a writing requirement in FDCPA section 809(a)(3) to

mean that a writing is not required. Further, commenters overall supported this interpretation.

The Bureau declines to modify how § 1006.34(c)(3)(iii) is phrased on the model

validation notice. The Bureau developed the phrase “call or write” for comprehension purposes.

The model notice’s language is intended to be plain language and consumer-friendly and was

validated through multiple rounds of qualitative and quantitative consumer testing.

278

Regulatory text and the model notice language reflecting that regulatory text need not be

identical in every case. For instance, if consumers may not understand a requirement as

described in regulatory text, it is appropriate to express that requirement in plain language in

consumer disclosures.

279

278

See pa rt III.C.

279

See the “Model Va lidation Notice” discussion in the section-by-section a nalysis of § 1006.34(d)(2) for a dditional

details about how the statement required by § 1006.34(c)(3)(iii) is disclosed on the model validation notice.

171

For these reasons, the Bureau is finalizing § 1006.34(c)(3)(iii) as proposed, with minor

wording changes to clarify the content of the required disclosure, including by specifying that the

consumer must notify the debt collector in writing “on or before” the end of the validation

period, rather than “before” the end of the validation period, as proposed.

280

34(c)(3)(iv)

Dodd-Frank Act section 1032(a) permits the Bureau to prescribe rules to ensure that the

features of any consumer financial product or service, both initially and over the term of the

product or service, are fully, accurately, and effectively disclosed to consumers in a manner that

permits consumers to understand the costs, benefits, and risks associated with the product or

service, in light of the facts and circumstances. To enhance consumer understanding of

protections available during the debt collection process, and pursuant to its authority under

Dodd-Frank Act section 1032(a), the Bureau proposed § 1006.34(c)(3)(iv) to provide that, if a

debt collector is collecting a consumer financial product or service debt, as defined in

§ 1006.2(f), then validation information includes a statement that informs the consumer that

additional information regarding consumer rights in debt collection is available on the Bureau’s

website at https://www.consumerfinance.gov.

Commenters generally agreed that consumers would benefit from information about

additional protections available to consumers experiencing debt collection. However,

commenters disagreed about the best way to provide that information.

A large number of consumer advocate and academic commenters recommended that,

rather than a statement that additional information is available on the Bureau’s website, the

Bureau should require debt collectors to provide consumers, along with the validation notice, a

280

The model validation notice uses the term “by” instead of “on or before” for plain language purposes.

172

reference document describing consumer protections in debt collection, similar to the document

that the Bureau developed prior to the SBREFA process.

281

Commenters stated that a reference

document would be more useful to consumers than a statement appearing on a validation notice.

Further, some such commenters stated that proposed § 1006.34(c)(3)(iv) would not help

consumers without internet access who are unable to visit the Bureau’s website.

Consumer advocate commenters and a group of academics also stated that, if the Bureau

does not require a reference document, the Bureau should revise proposed § 1006.34(c)(3)(iv) to

require debt collectors to include a web address that directs consumers to a Bureau page

dedicated to consumer protections in debt collection, instead of to the Bureau’s general website

landing page.

282

Other commenters stated that requiring consumers to click on a hyperlink if the

validation notice is delivered electronically would create procedural hurdles that reduce

consumer follow through and would pose security risks to consumers.

At least one industry trade group commenter disagreed and supported proposed

§ 1006.34(c)(3)(iv) on the grounds that including a reference document with the validation notice

would overwhelm consumers.

For the reasons discussed below, the Bureau is finalizing § 1006.34(c)(3)(iv) as proposed

with a revision in response to feedback.

The Bureau declines to require debt collectors to provide consumers a reference

document describing consumer protections in debt collection. Because the Bureau did not

281

For additional detail about information that the Bureau considered including in the reference document, see

appendix G of the Small Business Review Pa nel Outline, supra note 39.

282

Also, in response to proposed § 1006.34(d)(4)(ii), a consumer advocate commenter recommended that the Bureau

permit debt collectors to embed a hyperlink that directs consumers to the Bureau’s website address described in

proposed § 1006.34(c)(3)(iv). As discussed in the section-by-section analysis of § 1006.34(d)(4)(ii), the Bureau is

adopting this recommendation to permit debt collectors to include a hyperlink without losing the safe harbor in

§ 1006.34(d)(2).

173

propose such a requirement, the Bureau did not receive robust feedback in response to the

proposal about what such a required form should look like and how a requirement to provide it

might operate. Further, the Bureau expects that most consumers will receive the disclosure

referring to the Bureau’s website and will be able to access the website; most consumers use the

internet and have experience navigating to websites.

283

The Bureau determines that consumers would benefit from being directed to a page

dedicated to consumer protections in debt collection instead of the Bureau’s website landing

page. Accordingly, the Bureau is modifying § 1006.34(c)(3)(iv) to specifically reference the

webpage www.cfpb.gov/debt-collection instead of the Bureau’s general landing page. The

Bureau is also making a conforming change to how the statement described in

§ 1006.34(c)(3)(iv) is disclosed on the model validation notice.

The Bureau determines that consumers will not face significant security risks when

accessing the Bureau’s website. The vast majority of validation notices today are delivered by

mail, so an active hyperlink is not possible. In the case of electronic communications, the

Bureau recognizes that active hyperlinks can present security concerns to consumers, including,

among other things, phishing risks.

284

But the Bureau is not requiring debt collectors to include

an active hyperlink to the Bureau’s website in validation notices. In other words, even if the

validation information is provided electronically, § 1006.34(c)(3)(iv) only requires that the text

“www.cfpb.gov/debt-collection” be displayed in the information. As discussed in the section-by-

section analysis of § 1006.34(d)(4)(ii), a debt collector is permitted, but not required, to include

283

For example, a Pew Research Center study in 2019 found that 90 percent of U.S. adults use the internet. See Pew

Research Ctr., Internet/Broadband Fact Sheet, https://www.pewresearch.org/internet/fact-sheet/internet-

broadband/#who-uses-the-internet (la st visited Dec. 1, 2020).

284

See, e.g., Fed. Trade Comm’n, How to Recognize and Avoid Phishing Scams (May 2019),

https://www.consumer.ftc.gov/articles/how-recognize-and-avoid-phishing-scams (la st visited Dec. 1, 2020).

174

an active hyperlink to the Bureau’s website. This is because hyperlinks are a common feature of

electronic commercial communications. A validation notice that includes a hyperlink to the

Bureau’s website may be safe and convenient for a consumer. This would particularly be the

case if the debt collector had prior contact with the consumer and the consumer recognizes that

the validation notice was sent by a familiar source. If a consumer is unfamiliar with the debt

collector or otherwise has concerns about clicking on an active hyperlink, the consumer could

choose, rather than clicking on the hyperlink, to navigate independently to the Bureau’s website

to obtain more information about consumer protections in debt collection.

Accordingly, the Bureau is finalizing § 1006.34(c)(3)(iv) to provide that, if a debt

collector is collecting debt related to a consumer financial product or service as defined in

§ 1006.2(f), validation information includes a statement that informs the consumer that

additional information regarding consumer protections in debt collection is available on the

Bureau’s website at www.cfpb.gov/debt-collection.

34(c)(3)(v)

Proposed § 1006.34(c)(4) provided that validation information includes information that

a consumer can use to take certain actions, including disputing a debt or requesting original-

creditor information.

285

As discussed in the section-by-section analysis of § 1006.34(c)(3)(i) and

(ii), FDCPA section 809(b) provides that consumers must notify a debt collector “in writing” to

dispute a debt or request original-creditor information. Under § 1006.38, this writing

requirement is satisfied if a consumer provides a dispute or request for original-creditor

information to the debt collector using a medium of electronic communication through which a

285

Proposed § 1006.34(c)(4) set forth required consumer-response information. Proposed § 1006.34(d)(3)(iii)(B)

a nd (vi)(B) set forth certain other consumer-response information rela ted to payment requests a nd requests for

Spanish-language validation notices.

175

debt collector accepts electronic communications from consumers, such as an email address or a

website portal.

286

Thus, debt collectors are required to give legal effect to consumer disputes or

requests for original-creditor information submitted electronically only if a debt collector

chooses to accept electronic communications from consumers. The Bureau proposed

§ 1006.34(c)(3)(v) to provide that validation information includes a statement explaining how a

consumer can take the actions described in proposed § 1006.34(c)(4) and (d)(3), as applicable,

electronically, if the debt collector sends a validation notice electronically.

Proposed comment 34(c)(3)(v)–1 explained that a debt collector may provide the

information described in § 1006.34(c)(3)(v) by including the statements, “We accept disputes

electronically,” using that phrase or a substantially similar phrase, followed by an email address

or website portal that a consumer can use to take the action described in § 1006.34(c)(4)(i), and

“We accept original-creditor information requests electronically,” using that phrase or a

substantially similar phrase, followed by an email address or website portal that a consumer can

use to take the action described in § 1006.34(c)(4)(ii).

287

Proposed comment 34(c)(3)(v)–1 also

clarified that, if a debt collector accepts electronic communications from consumers through

more than one medium, such as by email and through a website portal, the debt collector is only

required to provide information regarding one of these media but may provide information about

additional media.

An industry commenter and an industry trade group commenter supported proposed

§ 1006.34(c)(3)(v) because it would inform consumers about alternative methods to contact debt

collectors and would increase the likelihood that consumers would engage with debt collectors.

286

See the section-by-section analysis of § 1006.38 and comment 38–1.

287

On the model validation notice, this phrase appears as “We accept such requests electronically.” This wording

devia tes from the regulatory text due to space considerations and the context of surrounding disclosures.

176

However, another industry commenter objected to the proposal because, the commenter argued,

allowing consumers to exercise verification rights electronically would encourage consumers to

submit verification requests for the purpose of delaying or avoiding paying a debt.

The Bureau determines that requiring debt collectors who provide validation notices

electronically to include statements on the validation notice explaining how consumers can

dispute the debt or request original-creditor information electronically will benefit consumers by

facilitating their ability to exercise those verification rights electronically. The Bureau agrees

that such disclosures will increase the likelihood of engagement between consumers and debt

collectors but does not agree that they will encourage consumers to submit disputes or original-

creditor-information requests to delay or avoid paying the debt. As discussed in the section-by-

section analysis of § 1006.34(c)(3)(i), commenters have not provided evidence demonstrating

that a significant number of consumers exercise their verification rights with the principal

purpose of avoiding paying debts that they owe. Absent such evidence, the Bureau declines to

conclude that consumers will exercise verification rights for this purpose.

Accordingly, the Bureau is finalizing § 1006.34(c)(3)(v) and its related commentary

largely as proposed, except that the final rule does not require debt collectors who provide

validation notices electronically to include statements stating how consumers can take the actions

described in § 1006.34(d)(3) (i.e., responding to a payment prompt (§ 1006.34(d)(3)(iii)) or

requesting a Spanish-language translation (§ 1006.34(d)(3)(vi))) electronically.

The Bureau notes that § 1006.34(d)(3)(vi)(A) affirmatively permits a debt collector to

include supplemental information in Spanish specifying how a consumer may request a Spanish-

language validation notice, and such information could include how the consumer may do so

electronically. In addition, as discussed at the outset of the section-by-section analysis of

177

§ 1006.34, the Bureau is not finalizing the proposed requirement that all validation notices must

be substantially similar to the model validation notice in order to avoid violating the rule.

Therefore, under the final rule, a debt collector who chooses to include either or both of the

optional payment disclosures in § 1006.34(d)(3)(iii) is not prohibited by Regulation F from

including a statement about how the consumer can make a payment electronically (although

including such a statement will take the debt collector out of the safe harbor in § 1006.34(d)(2)).

The Bureau is finalizing § 1006.34(c)(3)(v) pursuant to its authority to interpret FDCPA section

809(a) and (b), as well as its authority under Dodd-Frank Act section 1032(a).

34(c)(3)(vi)

The Bureau proposed § 1006.34(c)(3)(vi) to provide that, for a validation notice delivered

in the body of an email pursuant to procedures set forth in the proposal, validation information

includes the opt-out statement required by § 1006.6(e).

288

Proposed comment 34(c)(3)(vi)–1

clarified certain details, including that the requirement would not apply in the case of validation

notices delivered by hyperlink and that electronic delivery of a validation notice is not rendered

ineffective if a consumer opts out of future electronic communications pursuant to § 1006.6(e).

Although no commenters objected to proposed § 1006.34(c)(3)(vi), the Bureau is not

finalizing it. The Bureau has determined that it is not necessary to require debt collectors to

include the § 1006.6(e) opt-out instructions on validation notices sent electronically because

§ 1006.6(e) itself already requires those instructions in every electronic communication or

288

As fina lized in the November 2020 Final Rule, § 1006.6(e) requires a debt collector who communicates or

attempts to communicate with a consumer electronically in connection with the collection of a debt using a specific

email address, telephone number for text messages, or other electronic-medium address to include in such

communication or a ttempt to communicate a clear a nd conspicuous statement describing a rea sonable a nd simple

method by which the consumer can opt out of further electronic communications or attempts to communicate by the

debt collector to that address or telephone number. See 85 FR 76734, 76890 (Nov. 30, 2020).

178

communication attempt, which will includes every electronic communication transmitting a

validation notice. Thus, § 1006.34(c)(3)(vi) would be redundant.

A debt collector who sends a validation notice electronically may provide the § 1006.6(e)

disclosure in the electronic communication outside of the validation notice. A debt collector

who provides the model validation notice electronically will not lose the safe harbor described in

§ 1006.34(d)(2) by including the § 1006.6(e) disclosure in the electronic communication outside

the model notice. Accordingly, the Bureau determines that the § 1006.6(e) opt-out disclosure is

not necessary to include as validation information. Although the Bureau is not finalizing

proposed § 1006.34(c)(3)(vi), the Bureau reaffirms the clarification in proposed comment

34(c)(3)(vi)–1 that electronic delivery of a validation notice is not rendered ineffective merely

because a consumer opts out of future electronic communications pursuant to the instructions in

§ 1006.6(e).

34(c)(4) Consumer-Response Information

FDCPA section 809(b) contains certain requirements that a debt collector must satisfy if

a consumer exercises the consumer’s right to dispute the validity of the debt or request the name

and address of the original creditor. If a consumer disputes a debt in writing within 30 days of

receiving the validation information, a debt collector must stop collection of the debt until the

debt collector obtains verification of the debt or a copy of a judgment against the consumer and

mails it to the consumer. Similarly, if a consumer requests the name and address of the original

creditor in writing within 30 days of receiving the validation information, FDCPA section 809(b)

requires the debt collector to cease collection of the debt until the debt collector obtains and

mails such information to the consumer. FDCPA section 809(b) also prohibits a debt collector,

during the 30-day period consumers have to dispute a debt or request information about the

179

original creditor, from engaging in collection activities and communications that overshadow, or

are inconsistent with, the disclosure of the right to dispute the debt or request original-creditor

information, which the Bureau collectively refers to as “verification rights.”

The Bureau proposed § 1006.34(c)(4) to require a consumer-response information section

to help consumers exercise their FDCPA section 809(b) verification rights.

289

Specifically,

proposed § 1006.34(c)(4) provided that required validation information includes certain

consumer-response information situated next to prompts that consumers could use to indicate

that they want to take action or make a request. The proposed information, which is discussed in

the section-by-section analysis of § 1006.34(c)(4)(i) through (iii), included statements describing

certain actions that a consumer could take, including submitting a dispute, identifying the reason

for the dispute, providing additional detail about the dispute, and requesting original-creditor

information.

290

Proposed § 1006.34(c)(4) provided that the consumer-response information

section must be segregated from the validation information described in § 1006.34(c)(1) through

(3) and from any optional information included pursuant to proposed § 1006.34(d)(3)(i), (ii),

(iv), or (v) and, if the validation information is provided in writing or electronically, located at

the bottom of the notice and under the headings, “How do you want to respond?” and “Check all

that apply:”. As shown on the proposed model validation notice, the consumer-response

information section appeared as a tear-off portion of the form. Proposed comment 34(c)(4)–1

clarified that, if the validation information is provided in writing or electronically, a prompt

289

84 FR 23275, 23404 (May 21, 2019).

290

As discussed in the section-by-section a nalysis of § 1006.34(d)(3), proposed § 1006.34(d)(3)(iii)(B) a nd (vi)(B)

provided that a debt collector also could include a payment disclosure and Spanish-language validation notice

request disclosure as consumer-response information.

180

described in § 1006.34(c)(4) may be formatted as a checkbox, as shown on the model validation

notice.

A group of academic commenters expressed general support for proposed

§ 1006.34(c)(4). However, some industry commenters objected to the proposed consumer-

response information section. According to a depository institution, the proposed consumer-

response information formatted as a tear-off is an obsolete approach because physical mail is

increasingly less relevant as consumers prefer electronic communications. An industry

commenter stated that the proposed consumer-response information section would encourage

consumers to communicate through mail, which is more expensive and time-intensive than other

communication methods, such as email.

Several commenters raised concerns about proposed § 1006.34(c)(4)’s use of the heading

“How do you want to respond?” A group of State Attorneys General and at least one industry

commenter stated that consumers may incorrectly infer from this phrase that they must use the

consumer-response information section to respond to a debt collector. Some commenters

suggested that this phrase created the false impression that consumers must engage with the debt

collector, even if they prefer not to. To address this concern, consumer advocate commenters

and a group of State Attorneys General recommended that the consumer-response information

section include “Do Nothing” as a response option.

Some industry trade group commenters objected to proposed § 1006.34(c)(4) being

formatted for use with a return envelope. According to these commenters, some debt collectors

do not include return envelopes with validation notices and instituting such a practice would

entail significant costs. However, a consumer group commenter disagreed and stated that the

181

Bureau should require debt collectors to include a return envelope with prepaid postage to

facilitate use of the proposed consumer-response information section.

After considering comments, the Bureau is adopting § 1006.34(c)(4) with minor wording

changes to conform to changes in § 1006.34(d).

The Bureau acknowledges that electronic communications are increasingly prevalent in

society at large; however, most debt collectors do not presently communicate with consumers

electronically, particularly to provide validation notices.

291

Further, many consumers still prefer

to communicate with debt collectors via mail instead of email or other electronic media.

292

Given communication practices in the debt collection industry and consumer preferences, the

Bureau determines that formatting the model validation notice consumer-response information

section as a tear-off so that a consumer can return that portion of the form by mail if the

consumer so chooses will benefit both debt collectors and consumers. Thus, if debt collectors

opt not to format the consumer-response information section as a tear-off, the § 1006.34(d)(2)

safe harbor will not apply to their validation notices.

The Bureau concludes that the heading “How do you want to respond?” likely will not

lead consumers to believe that they must respond to the debt collector or use the consumer-

response information section to do so. Consumer testing indicated that consumers paid relatively

little attention to this heading.

293

Further, consumers generally grasped the consequences of not

291

See 85 FR 76734, 76852 (Nov. 30, 2020).

292

According to the CFPB Debt Collection Consumer Survey, 71 percent of consumers preferred to be contacted by

a debt collector by mail. Only 12 percent of consumers preferred email. Bureau of Consumer Fin. Prot., Consumer

Experience with Debt Collection: Findings from CFPB’s Survey of Consumer Views on Debt, a t 29-30 (Jan. 12,

2017), http://files.consumerfinance.gov/f/documents/201701_cfpb_Debt-Collection-Survey-Report.pdf (CFPB Debt

Collection Consumer Survey).

293

“The ‘You Have Rights’ and ‘How do you want to respond to this notice?’ sections had a comparatively low

number of fixations (i.e., a testing participant’s eyes resting on a piece of information) compared to other parts of the

182

responding to a validation notice.

294

These findings suggest that the heading will not induce

otherwise unwilling consumers to engage with debt collectors. This conclusion is bolstered by

findings from the Bureau’s most recent qualitative consumer testing. The Bureau’s consumer

testing suggests that consumers understand that they have the option of not engaging with a debt

collector in response to a validation notice.

295

This testing also indicates that consumers

understand that, if they choose to communicate with a debt collector, they do not have to use the

consumer-response information section to do so.

296

The Bureau therefore determines that it is

unnecessary to include a “Do Nothing” response option, as some commenters suggested.

The consumer-response information section should be formatted for use with a return

envelope. The fact that the consumer-response information established by § 1006.34(c)(4) is

formatted on the model validation notice for use with a return envelope does not require debt

collectors to include return envelopes with validation notices, even if they use the model notice.

Accordingly, the Bureau is finalizing § 1006.34(c)(4) with minor wording changes

to conform to changes in § 1006.34(d). The Bureau also is finalizing § 1006.34(c)(4)(i) through

(iii) and their related commentary with certain modifications that are discussed in the section-by-

section analysis below.

notice. These two sections were often discussed during the interview as being important so the fewer number of

fixa tions suggests that this information might have been easy to rea d a nd comprehend. Pa rticipants also commented

that these sections only needed to be scanned, further suggesting that fewer fixations on this section might have been

due to ease of processing the information rather than a disinterest in the information. See FMG Usability Report,

supra note 28, a t 7.

294

See id. at 83-84.

295

When asked about whether they were lega lly required respond to the m odel validation notice, a pproximately

90 percent of participants reported that they were not. See November 2020 Qualitative Testing Report, supra note

34, at 11.

296

During testing, participants generally understood that they could dispute the debt by telephone, electronically, or

writing with or without the “tear-off.” See id. at 15.

183

The Bureau is finalizing § 1006.34(c)(4) pursuant to its authority under FDCPA section

814(d) to prescribe rules with respect to the collection of debts by debt collectors and, as

described more fully below, its authority to implement and interpret FDCPA section 809. The

Bureau is also finalizing § 1006.34(c)(4) pursuant to its authority under section 1032(a) of the

Dodd-Frank Act, on the basis that the information in § 1006.34(c)(4)(i) through (iii) informs

consumers how to exercise their rights under FDCPA section 809(b) and therefore is a feature of

debt collection. Requiring disclosure of consumer-response information will help to ensure that

the features of debt collection are fully, accurately, and effectively disclosed to consumers, such

that consumers may better understand the costs, benefits and risks associated with debt

collection.

34(c)(4)(i) Dispute Prompts

FDCPA section 809(a)(4) requires a debt collector to disclose to consumers their right

under FDCPA section 809(b) to dispute the validity of the debt within 30 days after receipt of the

validation notice.

297

Proposed § 1006.34(c)(4)(i) provided that consumer-response information

includes statements, situated next to prompts, that the consumer can use to dispute the validity of

a debt and to specify a reason for that dispute.

298

Proposed § 1006.34(c)(4)(i), which was

designed to work in tandem with § 1006.34(c)(3)(i),

299

provided that consumer-response

information includes the following four statements, listed in the following order, using the

following phrasing or substantially similar phrasing, each next to a prompt: “I want to dispute the

297

15 U.S.C. 1692g(a)(4).

298

84 FR 23274, 23404-05 (May 21, 2019).

299

As fina lized, § 1006.34(c)(3)(i) provides that validation information includes the date the debt collector will

consider the end date of the validation period and a statement that, if the consumer notifies the debt collector in

writing on or before that date that the debt, or any portion of the debt, is disputed, the debt collector must cease

collection of the debt, or the disputed portion of the debt, until the debt collector sends the consumer either the

verification of the debt or a copy of a judgment.

184

debt because I think:”; “This is not my debt.”; “The amount is wrong.”; and “Other: (please

describe on reverse or attach additional information).”

A group of academic commenters and some consumer advocate commenters supported

the dispute prompts described in proposed § 1006.34(c)(4)(i). The academic commenters stated

that the prompts would facilitate consumer disputes because consumers are accustomed to using

forms with prompts, such as drop-down menus in online transactions. According to these

commenters, the Bureau should facilitate consumer disputes given the low consumer literacy

levels in the United States—particularly among consumers with limited English proficiency

(LEP consumers)—and the FDCPA’s least-sophisticated-consumer standard.

300

These

commenters stated that facilitating disputes will also benefit industry because consumer disputes

may lead to questionable or invalid debts being removed from the market.

Other commenters objected to proposed § 1006.34(c)(4)(i). Industry trade group

commenters stated that the proposed dispute prompts would increase dispute volume and,

consequently, debt collectors would incur additional costs responding to disputes. Industry

commenters stated that higher dispute volumes would overwhelm debt collectors, making it

difficult to identify and process valid disputes. Industry and industry trade group commenters

stated that the proposed dispute prompts would lead consumers to believe that they had to

dispute the debt, even if they recognized the debt as valid. Industry and industry trade groups

argued that streamlining the dispute process would encourage frivolous disputes. One industry

300

See, e.g., Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008) (“We use the ‘least sophisticated debtor’

standard in order to effectuate the basic purpose of the FDCPA: to protect all consumers, the gullible as well as the

shrewd.”) (cita tions and some internal quotation marks omitted); Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir.

1993) (“To serve the purposes of the consumer-protection la ws, courts have attempted to articulate a standard for

evaluating deceptiveness that does not rely on assumptions about the ‘a verage’ or ‘normal’ consumer. This effort is

grounded, quite sensibly, in the assumption that consumers of below-average sophistication or intelligence are

especially vulnerable to fraudulent schemes. The least-sophisticated-consumer standard protects these consumers in

a va riety of wa ys.”).

185

trade group stated that requiring a lawyer engaged in debt collection to include the proposed

dispute prompts on a validation notice would constitute providing legal advice to unrepresented

persons, which is a violation of attorney rules of professional conduct.

Industry and industry trade group commenters stated the proposed dispute prompts would

not solicit enough information for debt collectors to evaluate disputes. According to

commenters, the proposed dispute prompts are too general and would result in generic disputes

that would increase compliance costs, frustrate dispute investigation, undermine consumer

communication, and increase litigation risk. To address these concerns, commenters

recommended modifications to proposed § 1006.34(c)(4)(i). Some commenters suggested that

the validation notice provide additional space where a consumer could include additional dispute

detail, update contact information, or provide communication preferences. Other commenters

recommended replacing the proposed dispute prompts with narrative instructions that solicit

dispute detail and supporting documentation.

As discussed in the section-by-section analysis of § 1006.34(c)(2)(i), commenters stated

that some debt collectors receive payments and other correspondence, including disputes, at

separate addresses. Industry commenters stated that proposed § 1006.34(c)(4)(i) would

effectively combine a dispute form with a payment coupon. According to commenters, a

consumer’s dispute may not be processed in a timely fashion if a consumer returns a consumer-

response information form with a dispute to a dedicated payment address.

Several consumer advocate commenters recommended combining the proposed dispute

prompts into a single prompt. According to these commenters, a single dispute prompt would be

appropriate because the FDCPA does not require a consumer to specify a reason for a dispute

and a consumer may make unintentional admissions against their interest by providing details.

186

Some commenters suggested additional dispute-related prompts. Consumer advocate

commenters recommended prompts for debts discharged in bankruptcy, debts resulting from

identity theft, and debts that were previously paid or settled. Industry commenters urged the

Bureau to add a general account inquiry prompt. According to one industry commenter,

consumers with an account inquiry may perceive that they have no alternative but to select a

dispute prompt if proposed § 1006.34(c)(4)(i) does not include a general account inquiry prompt.

An industry commenter asked for additional guidance about how the proposed dispute

prompts should be formatted when validation information is provided on a website.

Consistent with the rationale discussed in the proposal and for the following reasons, the

Bureau is adopting proposed § 1006.34(c)(4)(i).

The Bureau determines that § 1006.34(c)(4)(i) will help consumers exercise their FDCPA

section 809 dispute rights, in part because prompts are a common feature in written and

electronic communications and most consumers are familiar with the concept. The Bureau

determines that facilitating consumer disputes under FDCPA section 809 is beneficial,

particularly for less sophisticated consumers. Further, to the extent consumer disputes help

remove invalid debts from circulation, § 1006.34(c)(4)(i) will improve the efficiency of debt

markets.

It is also not clear that finalizing the dispute prompts will result in a significant increase

in consumer disputes compared to current dispute rates. Section 1006.34(c)(2) will require debt

collectors to disclose more information about the debt and will help consumers recognize debts

they owe. Thus, § 1006.34(c)(2) may reduce the number of disputes arising from lack of

consumer recognition.

187

The Bureau disagrees that § 1006.34(c)(4)(i) will make it more difficult for debt

collectors to identify and process valid disputes. As noted above, § 1006.34(c)(2) should reduce

the number of disputes arising from lack of consumer recognition. Therefore, the disputes debt

collectors receive will be more likely to reflect problems with the underlying debt. Further,

§ 1006.34(c)(4)(i)’s dispute prompts—including § 1006.34(c)(4)(i)(D)’s free-form dispute

prompt—may help consumers articulate and provide more detailed information about the nature

of their disputes. Thus, debt collectors may better understand the nature of a consumer’s dispute

and be able to respond more efficiently than if consumers had provided generic disputes.

Further, dispute prompts likely will not lead consumers to believe that they must dispute

the debt. The Bureau’s consumer testing indicates that consumers who receive a validation

notice understand that they are not required to dispute a debt.

301

Further, the Bureau disagrees

that streamlining the dispute process will significantly increase the frequency of frivolous

disputes. As discussed in the section-by-section analysis of § 1006.34(c)(3)(i) and (v), debt

collectors have not provided evidence that supports the premise that a significant number of

consumers exercise their FDCPA section 809 verification rights solely to evade or avoid paying

debts that they owe. Absent such evidence, the Bureau declines to conclude that consumers will

dispute for such purposes.

The Bureau determines that requiring debt collectors who are attorneys to include dispute

prompts in the consumer-response information will not cause those debt collectors to violate the

301

During one round of testing, a pproximately 50 percent of participants stated that they would attempt to “confirm”

a debt in response to receiving a validation notice. Participants stated that they would do so by, for example,

contacting either the creditor or the debt collector. Participants did not report that they would dispute solely for the

purposes of confirming the details of the debt. See November 2020 Qualitative Testing Report, supra note 34, at 11.

188

professional rule of conduct against providing legal advice to an unrepresented person.

302

The

FDCPA requires all debt collectors, including debt collectors who are attorneys, to include in the

validation information statements relating to the consumer’s right to dispute the debt. The

dispute prompt merely provides consumers a simple way to exercise that right if the consumer so

chooses; it does not advise the consumer whether to do so. In addition, the commenter that

raised this concern cited no case law, legal interpretation, or comparable evidence to support the

proposition that including the dispute prompt will be problematic.

The Bureau is not modifying § 1006.34(c)(4)(i) to provide additional space for

consumers to provide dispute details or to replace the dispute prompts with narrative instructions.

As discussed above, the Bureau finds that it is unlikely that § 1006.34(c)(4)(i) will increase

generic dispute volume. On the contrary, the dispute prompts—including the free-form dispute

prompt in § 1006.34(c)(4)(i)(D)—will provide debt collectors with more detailed dispute

information than they receive in many cases today. Further, the free-form dispute prompt

informs consumers that they can provide additional information on the reverse of the consumer-

response-information section (which is formatted as a tear-off on the model validation notice) or

on a separate page. Thus, there is no need to provide additional space for dispute detail on the

validation notice itself.

Section 1006.34(c)(4)(i) will not lead to disputes being misdirected to dedicated payment

addresses. As discussed in the section-by-section analysis of § 1006.34(c)(4)(iii), the debt

collector must disclose in the consumer-response information section the same mailing address

302

See Am. Ba r Ass’n, Model Rules of Professional Conduct, Rule 4.3: Dealing with Unrepresented Person

https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduc

t/rule_4_3_dealing_with_unrepresented_person/ (last visited Dec. 2, 2020).

189

disclosed pursuant to § 1006.34(c)(2)(i), which is the mailing address where the debt collector

accepts disputes and requests for original-creditor information.

The Bureau declines to structure § 1006.34(c)(4)(i) as a single dispute prompt. As

discussed above, the dispute prompts are designed to help consumers articulate, and debt

collectors better understand, the nature of a consumer’s dispute and respond more efficiently

than if consumers had provided generic disputes. Reformulating § 1006.34(c)(4)(i) as a single

prompt would undermine this goal. Meanwhile, the dispute prompts described in

§ 1006.34(c)(4)(i) do not contain individualized information that could reasonably result in a

consumer making an unintentional admission against their interest.

The Bureau declines to adopt additional dispute-related prompts. Additional prompts for

debts discharged in bankruptcy, debts resulting from identity theft, and debts that were

previously paid or settled are, in the aggregate, not feasible and would likely overwhelm

consumers. Further, the Bureau believes the dispute prompts in § 1006.34(c)(4)(i)(B) (this is not

my debt) and (C) (the amount is wrong) essentially capture these scenarios.

The Bureau also declines to add a general account inquiry prompt distinct from the

dispute prompt, as suggested by some commenters who argued that consumers would use the

dispute prompts to obtain general information. The Bureau’s testing has shown that consumers

generally understand that their response options are not limited to selecting a dispute prompt and

that disputing the debt is not the appropriate method to raise a general question about the

account.

303

During usa bility testing, when participants were a sked what they could do if they did not think they owed the

debt, “a ll pa rticipants understood that they had options for contacting the debt collector to dispute the debt,” which

included calling a nd writing. FMG Usa bility Report, supra note 28, a t 48. See a l so November 2020 Qualitative

Testing Report, supra note 34, at 11 (discussion in “Response to the model validation notice” section).

190

The Bureau declines to provide additional guidance about formatting the dispute prompts

if validation information is provided on a website. As discussed in the November 2020 Final

Rule, the Bureau did not finalize several proposed interventions related to electronic delivery of

required notices, including proposed alternative procedures for providing the validation

information on a secure website (proposed § 1006.42(c)(2)(ii)).

304

Because the Bureau is not

addressing electronic delivery more broadly, the Bureau declines here to provide guidance about

disclosing validation information on websites. However, as discussed in the section-by-section

analysis of § 1006.34(d)(2), in contrast to the proposal, debt collectors are not required to use the

model validation notice or a substantially similar form.

Accordingly, the Bureau is finalizing proposed § 1006.34(c)(4)(i) pursuant to its

authority to implement and interpret FDCPA section 809, as well as its authority under Dodd-

Frank Act section 1032(a).

34(c)(4)(ii) Original-Creditor Information Prompt

FDCPA section 809(a)(5) requires a debt collector to disclose to consumers their right

under FDCPA section 809(b) to request the name and address of the original creditor, if different

from the current creditor.

305

Proposed § 1006.34(c)(4)(ii) provided that consumer-response

information includes the statement, “I want you to send me the name and address of the original

creditor,” using that phrase or a substantially similar phrase, next to a prompt the consumer could

use to request original-creditor information.

306

Proposed § 1006.34(c)(4)(ii) was intended to

304

85 FR 76734, 76850-55 (Nov. 30, 2020).

305

15 U.S.C. 1692g(a)(5).

306

84 FR 23274, 23405 (May 21, 2019).

191

work in tandem with proposed § 1006.34(c)(3)(ii).

307

The Bureau received no comments

specifically addressing proposed § 1006.34(c)(4)(ii) and is finalizing it as proposed.

34(c)(4)(iii)

FDCPA section 809(b) assumes that a consumer has the ability to write to a debt

collector to exercise the consumer’s verification rights.

308

Requiring a debt collector to include

mailing addresses for the consumer and the debt collector, along with the consumer-response

information described in § 1006.34(c)(4)(i) and (ii), may facilitate a consumer’s ability to

exercise the consumer’s verification rights. The Bureau proposed § 1006.34(c)(4)(iii) to provide

that consumer-response information includes mailing addresses for the consumer and the debt

collector.

309

An industry trade group stated that some debt collectors use vendors to receive and

process mail from consumers. According to this commenter, the Bureau should permit a debt

collector to disclose the address at which a debt collector receives mail, even if that address is

not the debt collector’s physical address.

The Bureau is finalizing § 1006.34(c)(4)(iii) with a clarifying revision that addresses the

commenter’s request regarding letter vendor mailing addresses. The Bureau is revising

§ 1006.34(c)(4)(iii) to provide that the mailing addresses disclosed for the consumer and the debt

collector in the consumer-response information must include the debt collector’s and the

consumer’s names and mailing addresses as disclosed pursuant to § 1006.34(c)(2)(i) and (ii). In

307

As fina lized, § 1006.34(c)(3)(ii) provides that validation information includes the date that the debt collector will

consider the end date of the validation period and a statement that, if the consumer requests in writing on or before

that date the name and address of the original creditor, the debt collector must cease collection of the debt until the

debt collector sends the consumer the name and address of the original creditor, if different from the current

creditor.

308

See 15 U.S.C. 1692g(b).

309

84 FR 23274, 23405 (May 21, 2019).

192

turn, the Bureau notes that final § 1006.34(c)(2)(i) and comment 34(c)(2)(i)–2 permit debt

collectors to disclose a vendor’s mailing address, if that is an address at which the debt collector

accepts disputes and requests for original-creditor information. Thus, under the final rule, a debt

collector may include a vendor’s address in the consumer-response information if that is the

address that the debt collector discloses pursuant to § 1006.34(c)(2)(i).

The Bureau notes that final § 1006.34(c)(2)(i) and comment 34(c)(2)(i)–1 permit a debt

collector to disclose its trade name or DBA, instead of its legal name. Thus, under the final rule,

a debt collector must disclose its trade name or DBA in the consumer-response information if

that is the name that the debt collector discloses pursuant to § 1006.34(c)(2)(i).

34(c)(5) Special Rule for Certain Residential Mortgage Debt

FDCPA section 809(a)(1) requires a debt collector to disclose to consumers the amount

of the debt.

310

As discussed in the section-by-section analysis of § 1006.34(c)(2)(vi) through

(viii), the Bureau interprets FDCPA section 809(a)(1) to require debt collectors to disclose three

pieces of itemization-related information: the itemization date; the amount of the debt on the

itemization date; and an itemization of the debt reflecting interest, fees, payments, and credits

since the itemization date.

For certain residential mortgage debt covered by TILA, as implemented by Regulation Z,

12 CFR 1026, 12 CFR 1026.41(b) generally requires that a periodic statement be delivered or

placed in the mail within a reasonably prompt time after the payment due date or the end of any

courtesy period provided for the previous billing cycle. The Bureau understands that most

310

15 U.S.C. 1692g(a)(1).

193

residential mortgage debt is subject to this requirement, although exceptions exist.

311

The

Bureau further understands that a consumer is provided with such a periodic statement every

billing cycle, even if a loan is transferred between servicers. Pursuant to 12 CFR 1026.41(d)(3),

such a periodic statement must include a past payment breakdown, which shows the total of all

payments received since the last statement, including a breakdown showing the amount, if any,

that was applied to principal, interest, escrow, fees, and charges, and the amount, if any, sent to

any suspense or unapplied funds account. The proposal stated that these periodic statement

disclosures may be functionally equivalent to, and as useful for the consumer as, the information

described in proposed § 1006.34(c)(2)(vii) through (ix).

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Proposed § 1006.34(c)(5) therefore provided that, for debts subject to Regulation Z,

12 CFR 1026.41, a debt collector need not provide the validation information described in

§ 1006.34(c)(2)(vii) through (ix) if the debt collector provided the consumer, at the same time as

the validation notice, a copy of the most recent periodic statement provided to the consumer

under 12 CFR 1026.41(b), and referred to that periodic statement in the validation notice.

Proposed comment 34(c)(5)–1 provided examples clarifying how debt collectors could comply

with § 1006.34(c)(5). Consistent with the proposal’s rationale, and for the reasons discussed

below, the Bureau is adopting § 1006.34(c)(5) and its related commentary with a substantive

modification and a clarification.

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The periodic statement requirement pursuant to 12 CFR 1026.41(b) does not apply to open-end consumer credit

transactions, such as a home equity line of credit. See 12 CFR 1026.41(a)(1). Pursuant to 12 CFR 1026.41(e),

certain types of transactions are exempt from § 1026.41(b)’s periodic statement requirement, including reverse

mortgages, timeshare plans, certain charged-off mortgage loans, mortgage loans with certain consumers in

bankruptcy, and fixed-rate mortgage loans where a servicer provides the consumer with a coupon book for payment.

Further, small servicers as defined by 12 CFR 1026.41(e)(4)(ii) are exempt from the periodic sta tement requirement.

312

84 FR 23274, 23348 (May 21, 2019).

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Some commenters recommended that the Bureau expand proposed § 1006.34(c)(5) to

cover additional debt types. An industry trade group commenter stated that the Bureau should

revise proposed § 1006.34(c)(5) to apply to all residential mortgage debt, including to

transactions that are exempt from § 1026.41(b)’s periodic statement requirement, such as

mortgage loans with certain consumers in bankruptcy. As discussed in detail in the section-by-

section analysis of § 1006.34(c)(2)(viii), the Bureau received feedback that its proposed

itemization would be incompatible with the account characteristics of debts in bankruptcy. Thus,

this commenter suggested that the Bureau should revise proposed § 1006.34(c)(5) to permit a

debt collector to reference the consumer’s bankruptcy case and the filed or pending proof of

claim instead of providing the itemization-related disclosures required by § 1006.34(c)(2). Other

industry trade group commenters variously recommended that the special rule extend to reverse

mortgages structured as open-end credit, home-equity lines of credit, and credit cards.

A consumer advocate commenter recommended that the Bureau revise proposed

§ 1006.34(c)(5) to apply only to debts that are currently subject to Regulation Z, 12 CFR

1026.41, to reduce the likelihood that a debt collector provides an outdated periodic statement.

According to the commenter, TILA coverage is fluid and a significant amount of time can elapse

between when the creditor provides a last periodic statement and when the debt collector

provides a validation notice. This commenter recommended that the Bureau revise proposed

§ 1006.34(c)(5) to provide that the previous periodic statement must have been provided no more

than 31 days before the validation notice is sent. The commenter also recommended that, if any

entity other than the current servicer provided the most recent periodic statement, the debt

collector must conduct a reasonable investigation to verify the accuracy of the prior entity’s

periodic statement or prepare its own periodic statement.

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The Bureau declines to expand § 1006.34(c)(5) to cover additional debt types. For

certain residential mortgage debt, the final rule permits debt collectors to provide a periodic

statement that was provided under 12 CFR 1026.41(d)(3) in lieu of the information described in

final § 1006.34(c)(2)(vi) through (viii) because those periodic statement disclosures are

functionally equivalent to, and as useful for the consumer as, that itemization information. This

special rule is not appropriate for the additional debt types recommended by commenters

because those debt types are not subject to prescriptive disclosure regimes, such as Regulation Z.

The Bureau doubts that disclosures used for those other debt types relate to information that is

functionally equivalent to, or as useful as, the information § 1006.34(c)(2)(vi) through (viii)

requires. For instance, mortgage loans with certain consumers in bankruptcy are exempt from

§ 1026.41(b)’s periodic statement requirement.

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With respect to debts in bankruptcy in

general, the Bankruptcy Code does not prescribe disclosure requirements for proofs of claim that

are comparable to Regulation Z, 12 CFR 1026.41(d)(3). As discussed in the section-by-section

analysis of § 1006.34(c)(2)(ix), reverse mortgages are not subject to prescriptive regulatory

requirements for periodic statements. The periodic statement requirement in 12 CFR 1026.41(b)

does not cover open-end consumer credit transactions, including home-equity lines of credit.

314

With respect to credit card debt, no special accommodation is necessary as debt collectors can

readily disclose the itemization information pursuant to § 1006.34(c)(2)(vi) through (viii).

The Bureau determines that § 1006.34(c)(5) should apply only to debts that are currently

subject to Regulation Z, 12 CFR 1026.41. Modifying the proposal to this effect is appropriate to

reduce the likelihood that a debt collector provides an outdated periodic statement, which may

313

See 12 CFR 1026.41(e).

314

See 12 CFR 1026.41(a)(1).

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not provide information that is functionally equivalent to, or as useful as, the information

described in § 1006.34(c)(2)(vi) through (viii). The Bureau therefore is revising proposed

§ 1006.34(c)(5) and its related commentary to provide that the special rule only applies to

residential mortgage debt if a periodic statement is required under Regulation Z, 12 CFR

1026.41, at the time a debt collector provides the validation notice.

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Accordingly, the Bureau is finalizing § 1006.34(c)(5) as described above and is finalizing

comment 34(c)(5)–1 with minor revisions for clarity and consistency with provisions of the final

rule.

34(d) Form of Validation Information

34(d)(1) In General

The Bureau proposed § 1006.34(d)(1)(i) to require that the validation information

described in § 1006.34(c) be conveyed in a clear and conspicuous manner. The Bureau reasoned

that FDCPA section 809(a)’s required disclosures would be ineffective unless a debt collector

disclosed them in a manner that was readily understandable to consumers.

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The Bureau

received no comments specifically addressing proposed § 1006.34(d)(1)(i). The Bureau

therefore is finalizing it largely as proposed but renumbered as § 1006.34(d)(1)

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and with a

wording change solely for consistency with final § 1006.34(c). The Bureau adopts

§ 1006.34(d)(1) to implement and interpret FDCPA section 809(a) and pursuant to its authority

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Under § 1006.34(d)(2)(ii), a debt collector who uses the m odel validation notice a nd who also uses the special

rule for certain residential mortgage debt under § 1006.34(c)(5) receives a safe harbor for use of the model notice

except with respect to the disclosures that appear on the separate page.

316

84 FR 23274, 23348 (May 21, 2019). Section 1006.34(b)(1) defines clear and conspicuous, and the Bureau

responded to comments on that definition in the section-by-section a nalysis of § 1006.34(b)(1).

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As discussed under the heading Proposed Provision Not Finalized in this section-by-section analysis, the Bureau

is not finalizing proposed § 1006.34(d)(1)(ii) and therefore is finalizing proposed § 1006.34(d)(1)(i) as

§ 1006.34(d)(1).

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under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt

collectors. The Bureau also adopts § 1006.34(d)(1) pursuant to its authority under section

1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of consumer

financial products and services are disclosed fully, accurately, and effectively. The Bureau

finalizes this requirement on the basis that validation information is a feature of debt collection

and this information must be readily understandable to be effectively and accurately disclosed.

Proposed Provision Not Finalized

As noted at the outset of the section-by-section analysis of § 1006.34, the Bureau

proposed that debt collectors could use the model validation notice to comply with the disclosure

requirements proposed in § 1006.34(a)(1)(i) and (d)(1).

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In turn, the Bureau proposed

§ 1006.34(d)(1)(ii) to require that, if provided in a validation notice, the content, format, and

placement of the validation information in § 1006.34(c) and the optional disclosures in

§ 1006.34(d)(3) must be substantially similar to the model validation notice. Proposed comment

34(d)(1)(ii)–1 explained that a debt collector could make certain changes as long as the resulting

disclosures were substantially similar to the model validation notice, and it provided an example

of a change that debt collectors may make to the validation notice if the consumer is deceased.

While some industry, industry trade group, and consumer advocate commenters

supported proposed § 1006.34(d)(1)(ii), other industry and industry trade group commenters

raised concerns that the proposed model validation notice would not accommodate all debt types

and debt collection practices, suggesting that some debt collectors therefore would be unable to

comply with proposed § 1006.34(d)(1)(ii). At least two commenters, including a debt buyer

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As discussed in the section-by-section a nalysis of § 1006.34(d)(1), the Bureau proposed § 1006.34(d)(1)(i) to

require that required validation information be provided in a clear and conspicuous manner.

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specializing in medical debt, stated that the proposed model validation notice was not well-suited

for non-financial debts, such as medical debts. A number of commenters objected to the

proposal because it would not allow debt collectors to combine multiple debts in a single

validation notice or place multiple validation notices in one envelope. Commenters asked the

Bureau to modify proposed § 1006.34(d)(1)(ii) to provide debt collectors more flexibility to

customize validation notices to accommodate their business practices and the types of debts they

collect.

As discussed in the section-by-section analysis of § 1006.34(d)(2), the Bureau has

determined that a model validation notice will benefit consumers and industry. However, based

in part on feedback from commenters, the Bureau also has determined that proposed

§ 1006.34(d)(1)(ii) was overly prescriptive. Proposed § 1006.34(d)(1)(ii) would have required

any validation notice provided by a debt collector to be substantially similar to the model

validation notice. Such a requirement could cause some debt collectors to face undue

compliance challenges depending on their business practices and the types of debts they collect.

For this reason, the Bureau is not finalizing proposed § 1006.34(d)(1)(ii) and its related

commentary. Instead, as discussed in the section-by-section analysis of § 1006.34(d)(2), the

Bureau is adopting a more flexible framework in which debt collectors need not use either the

model validation notice, specified variations of the model notice, or a substantially similar form,

but debt collectors who do so will receive a safe harbor for compliance with the information and

form requirements of § 1006.34(c) and (d)(1).

319

This flexible framework is more consistent

with model form safe harbors in other consumer financial regulations.

320

The Bureau determines

319

The Bureau is relocating and repurposing some of the proposed text of § 1006.34(d)(1)(ii) and comment

34(d)(1)(ii)–1 to § 1006.34(d)(2). See the section-by-section analysis of § 1006.34(d)(2).

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15 U.S.C. 1601 et seq.

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that this new framework will accommodate industry without significantly increasing risks to

consumers because the Bureau believes it is likely that, if possible, debt collectors will use the

model validation notice, specified variations of the model notice, or a substantially similar form

to receive the compliance safe harbor. The Bureau notes that a debt collector who provides the

validation information in a form that is not substantially similar either to the model validation

notice or to a specified variation of the model notice also is subject to the FDCPA section 807

prohibition on false or misleading representations and the FDCPA section 809(b) prohibition on

overshadowing.

34(d)(2) Safe Harbor

As discussed, the Bureau proposed § 1006.34(d)(2) to provide, pursuant to its authority

under Dodd-Frank Act section 1032(b), that a debt collector who uses the model validation

complies with the disclosure requirements of § 1006.34(a)(1)(i) and (d)(1).

321

Proposed

comment 34(d)(2)–1 provided certain details regarding use of the model validation notice.

Under proposed § 1006.34(d)(2) and as explained in proposed comment 34(d)(2)–1, although use

of the model validation notice was not required, debt collectors would have received a saf e

harbor for compliance only if they used the model validation notice. Under proposed

§ 1006.34(d)(2), debt collectors would not have received a safe harbor if they used a f orm that

was substantially similar to the model validation notice.

As discussed below, the Bureau is finalizing proposed § 1006.34(d)(2) and comment

34(d)(2)–1 with significant revisions to, among other things, provide that debt collectors may

321

84 FR 23274, 23405 (May 21, 2019). As discussed elsewhere in part V, proposed § 1006.34(a)(1)(i) provided

that debt collectors must send validation notices containing the information described in proposed § 1006.34(c) to

consumers in a manner permitted by § 1006.42 (i.e., in a manner reasonably expected to provide actual notice and in

a form that the consumer may keep and access later). And proposed § 1006.34(d)(1) provided that debt collectors

must provide such validation information clearly and conspicuously.

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obtain a safe harbor for compliance with the validation information disclosure requirements by

using either the model validation notice, specified variations of the model notice, or a

substantially similar form. The Bureau is finalizing new commentary to provide additional

details regarding the revised safe harbor framework.

Industry and industry trade group commenters overall supported providing a safe harbor

to debt collectors who use the model validation notice. An industry and an industry trade group

commenter stated that a safe harbor would reduce frivolous litigation and compliance costs. An

industry commenter stated that not requiring debt collectors to use the model validation notice

would help to ensure that debt collectors can provide validation notices in a manner consistent

with their business practices and the debt types they collect.

Some industry commenters asked the Bureau to specify what optional disclosures could

be added to the model notice. A number of industry and industry trade group commenters also

asked the Bureau to further clarify what changes debt collectors could make to the model

validation notice and still receive the safe harbor.

Relatedly, some industry and industry trade group commenters asked the Bureau to

clarify the meaning of “substantially similar,” and two industry trade group commenters

recommended that the Bureau adopt Regulation Z’s definition of substantially similar. Some

industry and industry trade group commenters recommended that the Bureau expand

§ 1006.34(d)(2) to provide that debt collectors who use the model validation notice comply with

FDCPA section 807’s prohibition on false or misleading statements and FDCPA section 809(b)’s

overshadowing prohibition.

322

See 15 U.S.C. 1692e; see also 15 U.S.C. 1692g(b) (“Any collection activities and communication during the 30-

day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or

request the name and address of the original creditor.”).

201

A group of consumer advocate commenters stated that proposed § 1006.34(d)(2) was too

broad. Specifically, according to the commenter, the safe harbor’s cross-reference to

§ 1006.34(a)(1)(i) was overbroad because simply using the model validation notice does not

mean that the debt collector sent the validation notice in an initial communication or within five

days of the initial communication as required by § 1006.34(a)(1)(i). This commenter

recommended that the Bureau remove the reference to § 1006.34(a)(1)(i) from § 1006.34(d)(2).

After considering this feedback, and to clarify each of the ways in which a debt collector

may receive a safe harbor for compliance with the final rule’s validation information disclosure

requirements, the Bureau is finalizing § 1006.34(d)(2) and its related commentary with

significant revisions, as follows.

34(d)(2)(i) In General

First, the Bureau is finalizing § 1006.34(d)(2)(i) to provide that, as proposed, a debt

collector who uses the model validation notice receives a safe harbor for compliance with the

final rule’s validation information disclosure requirements. The Bureau determines that a safe

harbor is appropriate because the model validation notice will effectively disclose information

required by § 1006.34(c), and the safe harbor will incentivize debt collectors to use the model

notice.

The Bureau agrees that the § 1006.34(d)(2) safe harbor should not cover delivery of the

validation notice. The Bureau recognizes the risk that a debt collector could deliver the model

validation notice in an ineffective manner and that, as a result, the notice would be delayed or

never received by the consumer. The Bureau does not intend § 1006.34(d)(2) to provide a safe

harbor in such a scenario. For this reason, the Bureau is finalizing § 1006.34(d)(2)(i) to specify

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that the safe harbor for use of the model notice covers only compliance with the information and

form requirements of final § 1006.34(c) and (d)(1).

In response to comments requesting clarity about the use of optional disclosures on the

model notice, the Bureau is finalizing § 1006.34(d)(2)(i) to squarely address how the safe harbor

applies with respect to the § 1006.34(d)(3) optional disclosures.

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First, the Bureau clarifies, as

was intended in the proposal, that a debt collector may include any or all of the § 1006.34(d)(3)

optional disclosures without losing the safe harbor pursuant to § 1006.34(d)(2). Specifically,

final § 1006.34(d)(2)(i) provides that the model validation notice contains the validation

information required by § 1006.34(c) and certain optional disclosures permitted by

§ 1006.34(d)(3). Section 1006.34(d)(2)(i) further provides that a debt collector who uses the

model validation notice complies with the information and form requirements of § 1006.34(c)

and (d)(1), including if the debt collector: omits any or all of the optional disclosures shown on

the model notice (see § 1006.34(d)(2)(i)(A)); or adds any or all of the optional disclosures

described in § 1006.34(d)(3) that are not shown on the model notice (see § 1006.34(d)(2)(i)(B)),

provided that any such optional disclosures are no more prominent than any of the required

validation information.

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323

Proposed § 1006.34(d)(3) specified that a debt collector who used the model validation notice could include a ny

of the optional disclosures along with the validation information without losing the § 1006.34(d)(2) sa fe harbor for

compliance.

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The model va lidation notice includes the following optional disclosures permitted by § 1006.34(d)(3), ea ch of

which is described in more detail in the section-by-section analysis below: (1) debt collector telephone contact

inf orm ation (see § 1006.34(d)(3)(i)); (2) reference code (see § 1006.34(d)(3)(ii)); (3) pa yment disclosures (see

§ 1006.34(d)(3)(iii)); (4) a statement referring to disclosures made under a pplicable la w on the reverse of the

va lida tion notice (see § 1006.34(d)(3)(iv)(A)); (5) debt collector’s website (see § 1006.34(d)(3)(v)(A));

(6) sta tement explaining how a consumer ca n dispute the debt or request origina l-creditor information electronically

(see § 1006.34(d)(3)(v)(B)); (7) Spa nish-language translation disclosures (see § 1006.34(d)(3)(vi)); (8) merchant

brand information (see § 1006.34(d)(3)(vii)); a nd (9) for debt not related to a consumer financial product or service,

the information specified in § 1006.34(c)(2)(iii) or (c)(3)(iv) (i.e., name of the creditor to whom the debt was owed

on the itemization date a nd Bureau’s debt collection website, respectively) (see § 1006.34(d)(3)(viii)). The model

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The requirement that any § 1006.34(d)(3) optional disclosures that are added to the model

validation notice be no more prominent than any of the validation information is designed to

ensure that any such optional disclosures do not overload consumers with information or distract

them from the required validation information. A debt collector who chooses to include one or

more of the § 1006.34(d)(3) optional disclosures that do not appear on the model validation

notice, but who violates the no-more-prominent requirement, loses the safe harbor under

§ 1006.34(d)(2) and may violate § 1006.34 depending on the facts and circumstances.

As discussed in the section-by-section analysis of § 1006.34(c)(1), a consumer advocate

commenter asked the Bureau to clarify what version of the FDCPA section 807(11) disclosure

should appear on the validation notice: the longer, initial disclosure described in § 1006.18(e)(1)

or the shorter, subsequent disclosure described in § 1006.18(e)(2). The model validation notice

includes the disclosure required by § 1006.18(e)(1). The Bureau is adopting new comment

34(d)(2)(i)–1 to clarify that a debt collector who uses the model notice to provide a validation

notice as described in § 1006.34(a)(1)(i)(B)—i.e., a debt collector who provides the validation

notice within five days of the initial communication—may replace the disclosure required by

§ 1006.18(e)(1) with the disclosure required by § 1006.18(e)(2) without losing the safe harbor

provided by use of the model notice. Comment 34(d)(2)(i)–1 also refers to comment 34(c)(1)–1

for further guidance related to providing the disclosure required by § 1006.18(e) on a validation

notice.

validation notice does not include the following optional disclosures permitted by § 1006.34(d)(3): (1) tim e-barred

debt disclosures m ade under a pplicable la w on the front of the validation notice (see § 1006.34(d)(3)(iv)(B));

(2) debt collector email address (see § 1006.34(d)(3)(v)(A)); and (3) a ffinity brand or facility name information (but,

a s noted a bove, merchant brand information is shown on the model notice in the same location) (see

§ 1006.34(d)(3)(vii)).

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The Bureau declines to extend the § 1006.34(d)(2) safe harbor to cover compliance with

FDCPA section 807’s prohibition on false or misleading statements. A debt collector who uses

the model validation notice is still capable of making false or misleading statements to

consumers in the notice. For example, a debt collector using the model validation notice could

include false or misleading information about the debt, such as an inflated current amount of the

debt.

However, the Bureau agrees that debt collectors who use the model validation notice

should have a safe harbor for compliance with FDCPA section 809(b)’s overshadowing

prohibition. The Bureau provides a safe harbor to that effect in § 1006.38(b). The section-by-

section analysis of § 1006.38(b) discusses this change in further detail.

34(d)(2)(ii) Certain Disclosures on a Separate Page

To conform with modifications in other sections of the Rule that permit debt collectors to

make certain itemization-related disclosures on separate pages, the Bureau is finalizing new

§ 1006.34(d)(2)(ii). As discussed in the section-by-section analysis of § 1006.34(c)(2)(viii),

when disclosing the itemization of the current amount of the debt, a debt collector has the option

of disclosing that itemization on a separate page. As discussed in the section-by-section analysis

of § 1006.34(c)(5), the final rule establishes a special rule for certain residential mortgage debt

that permits a debt collector, subject to certain conditions, to provide a periodic statement under

Regulation Z, 12 CFR 1026.41, instead of the itemization-related validation information required

by § 1006.34(c)(2)(vi) through (viii).

Section 1006.34(d)(2)(ii) establishes how these provisions interact with the safe harbor

provided by use of the model notice. Specifically, § 1006.34(d)(2)(ii) establishes that a debt

collector who uses the model validation notice and makes certain disclosures on a separate page

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pursuant to § 1006.34(c)(2)(viii) or (5) may still receive a safe harbor for use of the model notice

except with respect to the disclosures that appear on the separate page.

34(d)(2)(iii) Substantially Similar Form

As discussed in the section-by-section analysis of § 1006.34(d)(1), the Bureau has

determined that debt collectors should receive a safe harbor for the information and form

requirements of § 1006.34(c) and (d)(1) if they use a form that is substantially similar to the

model validation notice. The Bureau determines that, so long as a form is substantially similar to

the model notice, the validation information disclosures will remain effective; the Bureau

therefore is finalizing § 1006.34(d)(2) to provide this flexibility for debt collectors.

For this reason, final § 1006.34(d)(2)(iii) provides that a debt collector who uses the

model validation notice as described in § 1006.34(d)(2)(i) or (ii) may make changes to the form

and retain a safe harbor for compliance with the information and form requirements of

§ 1006.34(c) and (d)(1), provided that the form remains substantially similar to the model notice.

(As discussed elsewhere in this Notice, a debt collector may comply with the requirements in

§ 1006.34(c) and (d)(1) without using the model validation notice.)

Final comment 34(d)(2)(iii)–1 provides details regarding the meaning of substantially

similar, as requested by commenters, including examples of permissible changes. The Bureau

believes that these are differences that may be useful to debt collectors and consumers and will

not increase the risk of consumer harm.

One permissible change relates to deceased consumers. Comment 34(d)(2)(iii)–1

incorporates proposed comment 34(d)(1)(ii)–1, which discussed changes that debt collectors

could make if the consumer were deceased. The Bureau proposed comment 34(d)(1)(ii)–1 to

explain that a debt collector may make certain changes to the content, format, and placement of

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the validation information described in § 1006.34(c) as long as the resulting disclosures are

substantially similar to the model notice. Proposed comment 34(d)(1)(ii)–1 also provided an

example of a change that debt collectors may make to the model validation notice if the

consumer is deceased.

The Bureau explained that, although the model validation notice will contain the name of

the deceased consumer, some persons who are authorized to act on behalf of the deceased

consumer’s estate may be misled by the use of second person pronouns such as “you” in the

validation notice. For example, the proposed model validation notice stated that “you owe” the

debt collector. While nothing in the proposal would have prohibited a debt collector from

including a cover letter to explain the nature of the validation notice, proposed comment

34(d)(1)(ii)–1 also clarified that a debt collector could modify inapplicable language in the

validation notice that could suggest that the recipient of the notice was liable for the debt. For

example, if a debt collector sent a validation notice to a person authorized to act on behalf of the

deceased consumer’s estate, and if that person was not liable for the debt, the debt collector

could use the deceased consumer’s name instead of “you.”

The Bureau received a few comments on proposed comment 34(d)(1)(ii)–1. One trade

group commenter recommended that the Bureau allow debt collectors to replace second-person

pronouns with references to the estate, such as “the estate’s bill.” A group of consumer

advocates stated that, although the comment’s example would be appropriate in certain

circumstances, the Bureau should provide an entirely separate model validation notice for

decedent debt because, these commenters believed, debt collectors would be unlikely to diverge

from the model notice. Two trade group commenters also asked the Bureau to create a second

model validation notice for decedent debt.

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The Bureau is incorporating proposed comment 34(d)(1)(ii)–1 into comment

34(d)(2)(iii)–1, which clarifies that a debt collector may make changes to the model validation

notice and retain the safe harbor provided by use of the model notice. Because the example

regarding decedent debt is illustrative, nothing in comment 34(d)(2)(iii)–1 prohibits a debt

collector from making other substantially similar modifications, such as referring to the estate

rather than “you,” while still retaining the safe harbor. As explained elsewhere in this section-

by-section analysis, the Bureau declines to create separate model forms for certain types of debt.

The Bureau has modified the model-form-safe-harbor framework under § 1006.34(d)(2) to afford

debt collectors more flexibility to customize validation information to accommodate their

business practices and the types of debts they collect. Within identified limits, debt collectors

may make changes to the model validation notice and still meet the standard for a safe harbor

under § 1006.34(d)(2).

Comment 34(d)(2)(iii)–1 also includes four new examples of other permissible changes:

relocating the consumer-response information required by § 1006.34(c)(4) to facilitate mailing;

adding barcodes or QR codes, as long as the inclusion of such items does not violate

§ 1006.38(b); adding the date the form is generated; and embedding hyperlinks, if delivering the

form electronically, which was proposed in comment 34(d)(2)–1.

The Bureau clarifies that, if a debt collector includes disclosures other than (1) the

required validation information, (2) any optional disclosures described in § 1006.34(d)(3), or

(3) any disclosures that, if included, still leave the form substantially similar in substance, clarity,

and meaningful sequence to the model notice, then the safe harbor does not apply with respect to

the entirety of the validation notice. Except as described in § 1006.34(d)(2)(ii), the Bureau has

determined not to apply the safe harbor on a partial (i.e., disclosure-by-disclosure) basis because

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it is not clear how disclosures other than those referenced above would interact with the

validation information.

325

Final comment 34(d)(2)–1 clarifies that a debt collector who provides

a validation notice that is neither a notice described in § 1006.34(d)(2)(i) or (ii), nor a

substantially similar notice as described in § 1006.34(d)(2)(iii), does not receive a safe harbor for

compliance with the information and form requirements of § 1006.34(c) and (d)(1). The Bureau

notes that a debt collector who adds disclosures to the model validation notice that are not

referenced above nevertheless may be able to comply with the requirements in § 1006.34(c) and

(d)(1), § 1006.38(b)(1), and other requirements of the FDCPA and this final rule.

Model Validation Notice

While the majority of industry commenters who commented on the topic supported the

idea of a model form, some criticized the design of the proposed model validation notice. At

least two industry commenters stated that the proposed model notice contained too much content

and would overwhelm consumers. One commenter criticized the proposed model notice for

departing from the prevailing industry design for validation notices. A number of identical or

nearly identical comments suggested that consumers would confuse the proposed model notice

for a government document, such as an IRS notice, but did not explain what in particular about

the model notice they believed would cause such consumer confusion.

The Bureau’s findings do not support the conclusions that the model notice contains too

much content or will overwhelm consumers. The model validation notice was developed and

validated over multiple rounds of consumer testing that support its efficacy and

comprehensibility. The fact that the model validation notice departs from prevailing industry

325

As described in § 1006.34(d)(2)(ii), a debt collector who includes certain item ization-related disclosures on a

separate page in the same communication with the validation notice, and who includes on the front of the notice th e

required statement referring to those disclosures, receives a safe harbor for compliance with the information and

form requirements of § 1006.34(c) and (d)(1) except with respect to the disclosures that appear on the separate page.

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design is intended. As the proposal noted, many validation notices used today are confusing and

lack sufficient information to help consumers recognize their debts or exercise their FDCPA

verification rights.

326

With the model validation notice, the Bureau has developed an improved

validation notice that benefits both consumers and debt collectors. In quantitative testing, the

model validation notice consistently performed better than or equal to a “status quo” notice

designed to resemble validation notices that some debt collectors use today.

327

The Bureau also

disagrees that the model validation notice resembles a government document; the form clearly

discloses that it is from a debt collector, not the government.

A number of consumer advocate and academic commenters asserted that the proposed

model notice was not adequately tested. Some of these commenters stated that the Bureau’s

testing included too few participants to generate valid conclusions about the proposed model

notice’s efficacy or to evaluate the comprehension of consumers, particularly of the least

sophisticated consumers. For instance, a consumer advocate commenter expressed concern that

only 60 consumers were included in the cognitive and usability testing rounds.

328

Likewise, an

academic commenter stated that the Bureau’s consumer testing focused too heavily on observing

what testing participants looked at on the model notice (based on the use of eye tracking

techniques) at the expense of testing participants’ comprehension of the notice. Another

commenter stated that the Bureau should have tested more diverse groups, including consumers

with limited English proficiency, students, older consumers, and consumers from more diverse

socioeconomic backgrounds. Some consumer advocate and academic commenters

recommended that the Bureau field test the proposed model notice with consumers with real

326

See 84 FR 23274, 23338 (May 21, 2019).

327

CFPB Qua ntitative Testing Report, supra note 31, at 13-16.

328

See FMG Summary Report, supra note 29, at 5-7.

210

debts. A consumer advocate expressed concern about the performance of certain aspects of the

proposed model notice in quantitative testing, noting in particular that approximately 40 percent

of respondents who received the model notice failed to identify the correct entity the consumer

should pay.

329

The Bureau disagrees that the model notice was not adequately tested. The model

validation notice was developed and validated over multiple rounds of testing between 2014 and

2020, and the Bureau determines that these multiple rounds of testing were sufficient to assess

the model validation notice’s efficacy and comprehensibility. Further, the Bureau disagrees that

its testing focused on eye-tracking at the expense of comprehension testing as consumer

comprehension of the model validation notice was assessed in three rounds of testing. The

Bureau’s testing used eye-tracking in conjunction with consumer responses to inform its

conclusions.

The Bureau disagrees that it did not sample sufficiently diverse groups. The Bureau

selected respondents with the goal of developing diverse testing pools that would serve as a

proxy for the population at large. For example, in one round of usability testing, participants

reflected a range of demographic characteristics broken down by race and ethnicity, household

income, education level, and employment status.

330

With respect to criticism that the Bureau did

not “field test” the model validation notice, testing the form with consumers with real debts

would have been impractical. Regarding comments that the model validation notice did not

perform well during the quantitative testing round, the Bureau disagrees. As noted above, in that

329

Several comments in response to the May 2019 proposal also criticized the consumer testing as being outdated

because, when that proposal was published, the most recent testing had occurred in 2016. However, the Bureau

does not find any reason to believe that consumer understanding of the model notice has changed since 2016, and

the commenters did not provide any evidence to support such a claim. Moreover, since the May 2019 proposal, the

Burea u has conducted two a dditional testing rounds.

330

FMG Usa bility Report, supra note 28, at 85-87.

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testing round, the model validation notice consistently performed better than or equal to the

status quo notice, including on the question of to whom the consumer should send a payment.

331

Commenters provided feedback on specific aspects of the proposed validation notice,

including the notice’s disclosure of the FDCPA section 809(a)(4) dispute right. As discussed,

§ 1006.34(c)(3)(i), which implements FDCPA section 809(a)(4), requires debt collectors to:

(1) disclose the date the debt collector will consider the end date of the validation period; and

(2) state that, if the consumer notifies the debt collector in writing on or before that date that the

debt, or any portion of the debt, is disputed, the debt collector must cease collection of the debt,

or the disputed portion of the debt, until the debt collector sends the consumer either verification

of the debt or a copy of a judgment. The proposed model notice showed this disclosure as: “Call

or write to us by November 12, 2019, to dispute all or part of the debt . . . . If you write to us by

November 12, 2019, we must stop collection on any amount you dispute until we send you

information that shows you owe the debt.”

Some commenters criticized the phrase “shows you owe the debt.” Industry and industry

trade group commenters stated that “shows you owe the debt” would require debt collectors to

prove that consumers owe the debt. According to these commenters, this would modify the

verification standard established by FDCPA section 809 and expose debt collectors to increased

litigation risk.

332

Thus, these commenters recommended that the Bureau revise the proposed

331

In response to the question “According to the notice, if Person A wanted to make a payment on the debt, who

should he or she sent the payment to?” approximately 60 percent of consumers who received the model validation

notice answered correctly compared to approximately 40 percent of consumers who received a status quo notice.

CFPB Qua ntitative Testing Report, supra note 31, a t 14.

332

An industry commenter stated that courts define verification narrowly and have not imposed a duty upon debt

collectors to establish that a debt is owed. See Walton v. EOS CCA, 885 F.3d 1024, 1027-28 (7th Cir. 2018) (“The

verification assures the consumer that the creditor actually made the demand the debt collector said it did and equips

the consumer to evaluate the validity of the creditor’s cla im. It would be both burdensome and significantly beyond

the Act’s purpose to interpret § 1692g as requiring a debt collector to undertake an investigation into whether the

212

model notice to mirror the FDCPA’s statutory text.

333

In contrast, a group of academic

commenters stated that the verification standard established by case law is more robust than the

phrase “shows you owe the debt” suggests.

334

These commenters expressed concerns that the

proposed model notice would diminish the FDCPA’s verification standard.

The Bureau is not changing the final model validation notice’s disclosure of the FDCPA

section 809(a)(4) dispute right. The Bureau does not intend to modify FDCPA section 809’s

verification standard and disagrees that the phrase “shows you owe the debt” has that effect.

“Shows you owe the debt” is a plain-language phrase that the Bureau is adopting to improve

consumer understanding. This rulemaking does not interpret what constitutes verification under

FDCPA section 809.

The Bureau received comments on the model notice’s description of the dispute rights

under FDCPA section 809(a)(3) and (4). Under FDCPA section 809(a)(3), disputes can be made

orally or in writing, which the proposed model notice showed in part as: “Call or write to us by

November 12, 2019, to dispute all or part of the debt.” However, under FDCPA section

809(a)(4) and (b), requests for verification must be made in writing to have effect under the

statute.

335

An academic commenter and at least two consumer advocates expressed concern that

the proposed model notice’s description of these dispute rights was too nuanced, and consumers

creditor is actually entitled to the money it seeks.”); Haddad v. Alexander, Zelmanski, Danner & Fioritto, 758 F.3d

777 (6th Cir. 2014); Dunham v. Portfolio Recovery Assocs., 663 F.3d 997, 1003 (8th Cir. 2001) (citing Chaudhry v.

Gallerizzo, 174 F.3d 394 (4th Cir. 1999)).

333

For instance, one commenter recommended that the model notice should state “verifies the amount of the debt

claimed” instead of “shows you owe the debt.”

334

In Haddad, the court wrote that a verifying debt collector “should provide the date and nature of the transaction

that led to the debt, such as a purchase on a particular date, a missed rental payment for a specific month, a fee for a

particular service provided at a specified time, or a fine for a particular offense assessed on a certain date.” 758 F.3d

at 786.

335

While FDCPA section 809 requires a debt collector to honor only written verification requests, the Bureau

understands that some debt collectors honor both written and non-written verification requests. Nothing in the

FDCPA, the November 2020 Final Rule, or this rule prevents such debt collectors from continuing to do so.

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would not understand that they must write to request verification. To address this concern, a

commenter recommended that the Bureau revise the model notice to state, “Call us to dispute.

But if you do call, we may not be required to send information that shows you owe the debt.”

336

An industry trade group expressed uncertainty about why the proposed model notice used the

phrase “call or write” as opposed to “write” in different sentences.

The Bureau acknowledges that the dispute rights under FDCPA section 809(a)(3) and (4)

may not be intuitive to some consumers. Nevertheless, the Bureau settled on the current

phrasing in the model validation notice to emphasize the validation period end date as opposed to

the actions—i.e., calling or writing—that a consumer may take. In general, the model validation

notice has tested well. The Bureau is concerned that revising or adding content to clarify the

consequences of writing versus calling may undermine the overall efficacy of the form. Further,

this clarification would be unnecessary in many cases. The Bureau expects that many consumers

will visit the Bureau’s website for more detailed information regarding consumer protections in

debt collection.

337

However, to provide further clarity, the Bureau has reformatted how these

dispute rights appear on the model validation notice. Specifically, the dispute rights now appear

in separate bullets with bolded text for comprehension purposes.

Commenters provided feedback on the proposed model validation notice’s original-

creditor-information request disclosure pursuant to FDCPA section 809(a)(5). Section

336

This recommendation is based on phrasing that the Bureau adopted for usability testing. As noted in the usability

testing report, consumers who reviewed validation notices using this phrasing “exhibited less confusion” about the

distinction between how a debt collector would be required to respond when receiving a dispute in writing or by

telephone. See FMG Usa bility Report, supra note 28, at 55-56.

337

If the debt collector is collecting debt related to a consumer financial product or service as defined in

§ 1006.34.2(f), a statement that informs the consumer that additional information regarding consumer protections in

debt collection is a vailable on the Bureau’s website is required under § 1006.34(c)(3)(iv). If the debt collector is

collecting debt other than debt related to a consumer financial product or service, such a statement is optional under

§ 1006.34(d)(3)(viii).

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1006.34(c)(3)(ii), which implements this provision, requires debt collectors to disclose the date

the debt collector will consider the end date of the validation period and a statement that, if the

consumer requests in writing on or before that date the name and address of the original creditor,

the debt collector must cease collection of the debt until the debt collector sends the consumer

the name and address of the original creditor, if different from the current creditor. The proposed

model notice showed this disclosure as: “Write to ask for the name and address of the original

creditor. If you write by November 12, 2019, we will stop collection until we send you that

information.” An industry commenter stated that, by omitting the phrase “if different from the

current creditor,” the proposed model notice would compel debt collectors to respond to original-

creditor-information requests, even if the current creditor is the original creditor. A consumer

advocate supported the omission, arguing that debt collectors should be required to respond to all

original-creditor-information requests, even if the current creditor and the original creditor are

the same.

The Bureau concludes that the model validation notice should include the statutory

phrase “if different from the current creditor” when disclosing the original-creditor-information

request right. Thus, as finalized, the model validation notice includes the phrase “if different

from the current creditor.” Further, as discussed below, the Bureau is finalizing new

§ 1006.38(c)(2), which sets forth an alternative procedure that a debt collector may use to

respond to a consumer’s request for original-creditor information when the original creditor is

the same as the current creditor.

Commenters recommended two other modifications to the proposed model notice. To

emphasize the distinction between the debt collector and the creditor, an industry trade group

commenter suggested that the Bureau revise the proposed model notice to emphasize that “North

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South Group is a debt collector, not a creditor.” Another industry trade group stated that the

model notice should incorporate account information into the mini-Miranda disclosure, which

would frontload information that would help consumers recognize alleged debts and thereby

reduce the number of disputes debt collectors receive. An industry trade group commenter stated

that the proposed model notice is not properly formatted for standard mailing envelopes.

According to the commenter, § 1006.34(c)(4)’s consumer-response information section will not

fit a standard glassine window return envelope.

The Bureau declines other recommendations to modify the model validation notice. The

Bureau declines to specify that North South Group is “not a creditor,” as consumer testing

indicates that consumers generally have a functional understanding that North South Group is a

debt collector.

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The Bureau declines to modify the debt collection disclosure required by

FDCPA section 807(11) and § 1006.18(e) as finalized in the November 2020 Final Rule. The

Bureau concludes that combining this statutory disclosure with account information would

undermine its clarity and purpose. The Bureau declines to modify the model notice in response

to feedback that the form is not properly formatted for standard mailing envelopes. Comment

34(d)(2)(iii)–1 clarifies that debt collectors may relocate the consumer-response information

required by § 1006.34(c)(4) to facilitate mailing without losing the safe harbor provided by

§ 1006.34(d)(2). Thus, the Bureau determines that debt collectors will be able to format the form

for mailing.

Various commenters requested that the Bureau publish additional model validation

notices to address specific scenarios. Several consumer advocate commenters urged the Bureau

338

During November 2020 usability testing, 98 percent of participants correctly identified North South Group as the

correct party to send payments to. Further, participants generally understood that they could dispute the debt with

North South Group. See November 2020 Qualitative Testing Report, supra note 34, at 15.

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to translate the model notice into other languages, including Spanish. An industry trade group

commenter recommended that the Bureau develop a model notice that debt collectors could use

with consumers who are not obligated on the debt, such as heirs, successors in interest, and

consumers whose debts were discharged in bankruptcy. An industry commenter recommended

that the Bureau create a model notice that omits all optional disclosures.

The Bureau declines to create additional model validation notice forms. As discussed

earlier in this section-by-section analysis, the Bureau has modified the model-form-safe-harbor

framework under § 1006.34(d)(2) to afford debt collectors more flexibility to customize

validation information to accommodate their business practices and the types of debts they

collect. Within identified limits, debt collectors may make changes to the model validation

notice and still meet the standard for a safe harbor under § 1006.34(d)(2).

The Bureau is making an additional change to the model validation notice in response to

testing. The statement required by § 1006.34(c)(3)(iv) informs the consumer that additional

information regarding consumer protections in debt collection is available on the Bureau’s

website. The Bureau’s most recent consumer testing indicated that a small number of

participants who used the model validation notice were uncertain about where to find more

information about consumers’ protections in debt collection.

339

In response to this finding, the

Bureau is modifying how the statement required by § 1006.34(c)(3)(iv) appears on the model

validation notice to further emphasize this disclosure and the Bureau’s website address.

339

During the most recent round of qualitative testing, a few participants stated that they were unsure how to learn

more about debt collection in general. For example, one participant was unable to find the statement required by

§ 1006.34(c)(3)(iv) on the model notice. See November 2020 Qualitative Testing Report, supra note 34, at 13.

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34(d)(3) Optional Disclosures

Proposed § 1006.34(d)(3) provided that a debt collector could include the optional

information described in § 1006.34(d)(3)(i) through (vi) when providing the validation

information. The Bureau received no comments specifically addressing the language in

proposed § 1006.34(d)(3). Commenters did suggest a variety of optional disclosures to add to

§ 1006.34(d)(3), such as barcodes or QR codes, the date a validation notice was created and sent,

disclosures required by government creditors, and a disclosure notifying the consumer if the debt

collector will record telephone calls. Some of these suggested disclosures are permissible

changes to the model notice under § 1006.34(d)(2)(iii)

340

or optional disclosures under

§ 1006.34(d)(3), and debt collectors can choose to make other suggested disclosures without safe

harbor protection.

The Bureau is finalizing § 1006.34(d)(3) largely as proposed but with minor technical

revisions for clarity and with one substantive revision to clarify that a debt collector who

includes any of the optional disclosures receives the safe harbor described in § 1006.34(d)(2),

provided that the debt collector otherwise uses the model validation notice or a variation of the

model notice as described in § 1006.34(d)(2). This revision harmonizes § 1006.34(d)(3) with

certain revisions to § 1006.34(d)(2) in the final rule.

341

The Bureau is finalizing § 1006.34(d)(3) and the related provisions of § 1006.34(d)(2),

including each of the optional disclosures that § 1006.34(d)(3) permits debt collectors to provide,

to implement and interpret FDCPA section 809(a) and (b) and pursuant to its FDCPA section

340

See comment 34(d)(2)(iii)–1 (examples of permissible changes to the model notice include (1) adding barcodes

or QR codes as long as their inclusion does not violate § 1006.38(b), a nd (2) adding the date the form is genera ted).

341

See the section-by-section a nalysis of § 1006.34(d)(2)(i), pa rticularly the discussion of new § 1006.34(d)(2)(i)(A)

and (B), which refers to the optional disclosures.

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814(d) authority to prescribe rules with respect to the collection of debts by debt collectors. The

Bureau also is finalizing § 1006.34(d)(3) and the optional disclosures pursuant to its authority

under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of

consumer financial products and services are disclosed fully, accurately, and effectively.

34(d)(3)(i) Telephone Contact Information

Proposed § 1006.34(d)(3)(i) provided that a debt collector could include, along with the

validation information, the debt collector’s telephone contact information, including telephone

number and the times that the debt collector accepts consumer telephone calls.

Two industry trade group commenters supported permitting debt collectors to disclose

telephone contact information, with one such commenter noting that it would facilitate

communication with consumers, and the other noting that some State laws require debt collectors

to disclose telephone contact information. A group of consumer advocate commenters

recommended that the Bureau make telephone contact information a mandatory disclosure.

The Bureau determines that debt collectors should be permitted to include their telephone

contact information along with the validation information. Section 1006.34(d)(3)(i) will

accommodate debt collectors who choose to communicate with consumers by telephone or who

are required to disclose telephone contact information by applicable State law. The Bureau

declines to make telephone contact information a mandatory disclosure because, while many

debt collectors likely will provide telephone contact information, either by choice or because of a

State-law requirement, some debt collectors may not need or want to do so. In such cases,

consumers can use other contact information required in the validation information to contact the

debt collector. For these reasons, the Bureau is finalizing § 1006.34(d)(3)(i) largely as proposed,

except that the Bureau is finalizing the clarification that telephone contact information may

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include, for example, a telephone number as well as the times that the debt collector accepts

consumer telephone calls, as new comment 34(d)(3)(i)–1, rather than in the regulation text as

proposed.

34(d)(3)(ii) Reference Code

Many debt collectors include reference codes on validation notices for administrative

purposes. The Bureau proposed § 1006.34(d)(3)(ii) to accommodate this practice by permitting

a debt collector to include, along with the validation information, a number or code that the debt

collector uses to identify the debt or the consumer. One industry commenter asked the Bureau to

create a safe harbor for debt collectors to use an account number as a reference code, if that

number is labeled as a reference code. The Bureau determines that creating such a safe harbor is

unnecessary because debt collectors may use any number they choose as a reference code.

342

The Bureau therefore is finalizing § 1006.34(d)(3)(ii) as proposed.

34(d)(3)(iii) Payment Disclosures

The Bureau proposed in § 1006.34(d)(3)(iii) to allow debt collectors to include certain

payment disclosures along with the validation information, provided that such disclosures were

no more prominent than any of the validation information. Proposed § 1006.34(d)(3)(iii)(A)

provided that a debt collector could include in the validation notice the statement “Contact us

about your payment options,” using that phrase or a substantially similar phrase. Proposed

§ 1006.34(d)(3)(iii)(B) provided that a debt collector could include in the consumer-response

information section described in proposed § 1006.34(c)(4) the statement, “I enclosed this

amount,” using that phrase or a substantially similar phrase, payment instructions after that

342

Although § 1006.34(d)(3)(ii) permits debt collectors to use any number they choose as a reference code, debt

collectors may be prohibited from using certain numbers by other applicable laws, such as privacy or data security

rules or regulations.

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statement, and a prompt for a consumer to write in a payment amount. As discussed below, the

Bureau is finalizing § 1006.34(d)(3)(iii) largely as proposed, but with certain revisions for clarity

and consistency with other provisions in the final rule.

Industry and industry trade group commenters supported permitting debt collectors to

include optional payment disclosures. One industry trade group stated that the proposed optional

payment disclosures were appropriate because they would not violate FDCPA section 809(b)’s

overshadowing prohibition.

Consumer advocate commenters generally objected to proposed § 1006.34(d)(3)(iii). A

number of these commenters stated that consumers may perceive the payment disclosures as

threatening, may misconstrue the disclosures as stating that consumers must make a payment to

exercise their FDCPA dispute right, or may be confused about whether a payment is in their

interest. Some commenters stated that the proposed disclosures could lead consumers to make

payments that they might not otherwise have made, which some commenters noted could cause

consumers to inadvertently revive previously time-barred debts. These commenters asked the

Bureau not to finalize proposed § 1006.34(d)(3)(iii).

Some commenters suggested revisions to the proposed optional payment disclosures.

Industry and industry trade group commenters recommended that the Bureau make the proposed

optional payment disclosures more prominent. For example, some commenters suggested that

the proposed optional payment disclosures be placed at the top of the consumer-response

information section. An industry commenter recommended that the model validation notice

include additional optional payment disclosures. Industry trade group commenters

recommended that the Bureau permit debt collectors to include instructions about how a

consumer could make a payment by telephone, website, or alternative payment methods, such as

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debit card or ACH. Based on the concerns noted above about potential consumer

misunderstanding of the payment disclosures, a group of consumer advocate commenters urged

the Bureau to amend the validation notice to segregate the payment disclosures from the other

disclosures and to eliminate the payment prompt on the consumer response form.

For the reasons discussed in the proposal, the Bureau determines that the proposed

optional payment disclosures facilitate payments that may benefit both consumers and debt

collectors. For consumers who recognize and choose to repay all or part of a debt, payment

disclosures may make the transaction more efficient and convenient. In addition, for consumers

who determine that they owe a debt but may not be ready to repay all of it at that time, payment

disclosures may facilitate a discussion that can lead to repayment, settlement, or a payment

plan.

343

The Bureau also has determined that the optional payment disclosures do not

overshadow, and are not inconsistent with, consumers’ verification rights pursuant to FDCPA

section 809(b).

344

Further, the Bureau’s testing found that the model validation notice, which was tested

with the optional payment disclosures, was not threatening or intimidating.

345

The Bureau

disagrees that consumers will believe mistakenly that they must make a payment to exercise their

verification rights. As the proposal noted, consumer testing indicates that consumers who

encounter a payment disclosure on a validation notice understand that a payment is not required

343

See 84 FR 23274, 23350 (May 21, 2019).

344

For example, during consumer testing, participants reported a variety of actions they thought they could take, and

approximately 50 percent of respondents sa id they would confirm the debt is accurate before responding. Sim ila rly,

participants who received the model validation notice, which included the optional payment disclosures, generally

understood from the notice how they could dispute the debt. See November 2020 Qualitative Testing Report, supra

note 34, a t 11, 15.

345

Pa rticipa nts with prior debt collection experience observed that the m odel notice was “different” than other

validation notices they had received because the notice did not include threatening or intim idating la nguage. See

November 2020 Qualitative Testing Report, supra note 34, a t 10.

222

to dispute a debt.

346

The Bureau determines that inclusion of the neutral, non-threatening

optional payment disclosures will not confuse consumers about whether making a payment is in

their best interest. For the same reasons, the Bureau declines the suggestion to segregate the

payment disclosures from the other disclosures and to eliminate the payment prompt on the

consumer response form.

The Bureau declines recommendations to permit debt collectors to emphasize or

highlight the payment option disclosures. Making the payment disclosures more prominent, as

some industry commenters suggested, would reduce the efficacy of the model validation notice

and risk overshadowing the validation information in violation of FDCPA section 809(b). The

Bureau also determines that the optional payment disclosures in § 1006.34(d)(3)(iii)(A) and (B)

are sufficient to facilitate payments

347

and that additional prominence for the payment

disclosures is not justified. The Bureau also declines to permit debt collectors to include specific

instructions about other payment methods. Section 1006.34(d)(3)(iii)(A) permits debt collectors

to invite consumers to contact them about payment options, and debt collectors have the ability

to provide information about alternative payment methods in subsequent communications.

For these reasons, this Bureau is finalizing § 1006.34(d)(3)(iii) largely as proposed but

with several revisions for clarity and for consistency with other provisions in the final rule. First,

the Bureau is deleting the sentences that specified that the optional payment disclosures in both

§ 1006.34(d)(3)(iii)(A) and (B) must be no more prominent than any of the validation

information. These deleted sentences are unnecessary in view of revisions to the final rule in

346

FMG Usa bility Report, supra note 28, at 59-61.

347

During usability testing, participants expressed an understanding that one purpose of the model validation notice

was to solicit payment on a debt. When asked about their payment options based on the model validation notice,

approximately 80 percent of participants stated that they would contact the debt collector by telephone, website,

email, or write to explore payment options. See November 2020 Qualitative Testing Report, supra note 34, a t 10,12.

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§ 1006.34(d)(2) that apply to all of the optional disclosures, which makes the deleted sentences

redundant.

348

In addition, the Bureau is adding language to clarify that a debt collector may

choose to include either of the optional payment disclosures, or both of them. Lastly, the Bureau

is finalizing § 1006.34(d)(3)(iii)(B) to clarify that the optional payment disclosure must appear

“below” (rather than merely “with”) the consumer-response information required by

§ 1006.34(c)(4)(i) and (ii).

Accordingly, final § 1006.34(d)(3)(iii) provides that debt collectors may include either or

both of the following payment disclosures: (1) the statement, “Contact us about your payment

options,” using that phrase or a substantially similar phrase; and (2) below the consumer-

response information required by § 1006.34(c)(4)(i) and (ii), the statement, “I enclosed this

amount,” using that phrase or a substantially similar phrase, payment instructions after that

statement, and a prompt.

34(d)(3)(iv) Disclosures Under Applicable Law

Some States require specific disclosures to appear on validation notices. To enable debt

collectors to comply with both § 1006.34(a)(1) and disclosure requirements under other

applicable law, the Bureau proposed § 1006.34(d)(3)(iv) to permit a debt collector to include, on

the front of the validation notice, a statement that other disclosures required by applicable law

appear on the reverse of the form and, on the reverse of the validation notice, any such legally

required disclosures. Proposed comment 34(d)(3)(iv)–1 provided examples of disclosure

requirements that proposed § 1006.34(d)(3)(iv) would cover, including disclosures required by

348

Fina l § 1006.34(d)(2)(i) sta tes that certain optional disclosures permitted by § 1006.34(d)(3) a re contained on the

model notice; those optional disclosures satisfy the requirement to be no more prominent than any validation

inf orm ation. Fina l § 1006.34(d)(2)(i)(B) a lso permits inclusion of the optional disclosures described by

§ 1006.34(d)(3) that are not included on the model notice so long as they are no more prominent than any validation

inf orm ation; see the section-by-section analysis of § 1006.34(d)(2)(i) for more detail.

224

State statutes or regulations and disclosures required by judicial opinions or orders. For the

reasons discussed below, the Bureau is adopting proposed § 1006.34(d)(3)(iv) with revisions,

including the addition of new regulatory text subsections and commentary.

A number of industry and industry trade group commenters stated that the Bureau’s

proposal regarding disclosures required by other applicable law would either conflict with or not

accommodate such disclosures. Commenters stated that some States require disclosures to

appear on the front of a validation notice.

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To address such concerns, commenters

recommended that the Bureau allow debt collectors to include required State law disclosures on

the front of the validation notice. One commenter, an industry trade group, urged the Bureau to

allow for formatting flexibility for such State law disclosures while still affording safe harbor

protection. At least one commenter suggested that the Bureau preempt State laws that require

disclosures on the front of a validation notice.

The Bureau determines that, particularly with the changes to the model validation notice

discussed in the section-by-section analysis, final § 1006.34(d)(3)(iv) generally will

accommodate disclosures required by other applicable law.

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As noted above, a few States

require time-barred debt disclosures to appear on the front of a validation notice; time-barred

debt disclosures are discussed further below. The Bureau is not aware that States specifically

require any other disclosures to appear on the front of the validation notice; as such, the Bureau

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Although these commenters cited various State laws requiring disclosures, they primarily referred to State laws

requiring time-barred debt disclosures and revival disclosures. For example, one industry trade group commenter

noted that Massachusetts, New Mexico, and New York State and City require disclosures a bout tim e-barred debt

and revival that specifically or pra ctically m ust a ppear on the front page of the validation notice.

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As discussed in the section-by-section a nalysis of § 1006.34(d)(2), the final rule permits a debt collector who

uses the m odel validation notice, specified varia tions of the m odel notice, or a substantially sim ila r form to receive a

sa fe harbor. Mo reover, a s discussed below in this section-by-section analysis of § 1006.34(d)(3)(iv), the Bureau is

modifying how the statement required by § 1006.34(d)(3)(iv) is disclosed on the model validation notice to mirror

language on a disclosure required under Wisconsin law.

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concludes that disclosures specifically required by applicable law, other than in those few

instances relating to time-barred debt, can be accommodated on the reverse of the validation

notice. The Bureau also is not aware of font size, prominence, or placement requirements

established by State or other applicable law that final § 1006.34(d)(3)(iv) will not accommodate,

as discussed further below. Further, the statement that § 1006.34(d)(3)(iv) permits on the front

of a validation notice is consistent with State laws that require statements on the front of the

notice.

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The Bureau will continue to monitor whether disclosures required by other applicable

law are inconsistent or conflict with § 1006.34 or Regulation F generally, and if such an

inconsistency or conflict is identified, the Bureau will endeavor to take action to address it. The

Bureau also reiterates that, unlike the proposal, the final rule does not require the validation

notice to be substantially similar to the model validation notice; thus, if § 1006.34(d)(3)(iv) does

not accommodate a disclosure required under State or other applicable law, then debt collectors

can provide such a disclosure without necessarily violating the rule, but they would lose the

§ 1006.34(d)(2) safe harbor.

The Bureau has revised § 1006.34(d)(3)(iv) in response to feedback and for clarity. Final

§ 1006.34(d)(3)(iv)(A) provides that the debt collector may include, on the reverse of the

validation notice, any disclosures that are specifically required by, or that provide safe harbors

under, applicable law and, if any such disclosures are included, a statement on the front of the

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See, e.g., Colo. Rev. Stat. sec. 12-14-105(3)(c) (“In its initia l written communication to a consumer, a collection

a gency shall include the following statement: ‘For information about the Colorado Fair Debt Collection Pra ctices

Act, see www.ago.state.co.us/cadc/cadcmain.cfm.’ If the notification is placed on the back of the written

communication, there shall be a statement on the front notifying the consumer of such fact.”); Wis. Admin. Code

DFI-Bkg sec. 74.13 (“Unless the initia l communication is written a nd contains the following notice or the debtor has

paid the debt, a licensee shall send the debtor the following notice within 5 days after the initial communication with

a debtor: ‘This collection agency is licensed by the Division of Banking in the Wisconsin Department of Financial

Institutions, www.wdfi.org.’ . . . here the notice required by sub. (1) is printed on the reverse side of any collection

notice or validation sent by the licensee, the front of such notice shall bear the following statement in not less than

8 point type: “Notice: See Reverse Side for Important Information.”).

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validation notice referring to those disclosures. Final comment 34(d)(3)(iv)(A)–1 clarifies that

disclosures permitted by § 1006.34(d)(3)(iv)(A) include, for example, specific disclosures

required by Federal, State, or municipal statutes or regulations, and specific disclosures required

by judicial or administrative decisions or orders, including administrative consent orders. The

comment also describes how such disclosures could include, for example, time-barred debt

disclosures and disclosures that the current amount of the debt may increase or vary due to

interest, fees, or other charges, provided that such disclosures are specifically required by

applicable law.

The Bureau has revised § 1006.34(d)(3)(iv) and its accompanying commentary from the

proposal to clarify the disclosures that are permitted by § 1006.34(d)(3)(iv). Specifically, the

revisions clarify that the provision applies if a debt collector must comply with a specific

disclosure requirement under Federal, State, or local law, or under a judicial or administrative

decision or order. As such, the Bureau emphasizes that this provision is not intended to capture

circumstances in which a debt collector is not providing a disclosure that is required under a

specific law, decision, or order, but rather the debt collector is providing a disclosure to try to

comply with a more general legal requirement. For example, if the debt collector were to add

language to the validation notice to try to avoid a finding of an unfair, deceptive, or abusive

practice under Dodd-Frank Act section 1031 or the FDCPA, that is not an optional disclosure

covered by § 1006.34(d)(3)(iv). Debt collectors are not precluded from making such disclosures,

but they will not receive the safe harbor under § 1006.34(d)(2).

The Bureau has made modifications to the final rule, moreover, to provide additional

flexibility with respect to time-barred debt disclosures, in response to feedback to the proposal.

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Under new § 1006.34(d)(3)(iv)(B),

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if a debt collector is collecting time-barred debt, the debt

collector may include on the front of the validation notice any time-barred debt disclosure that is

specifically required by, or that provides a safe harbor under, applicable law, provided that

applicable law specifies the content of the disclosure.

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New comment 34(d)(3)(iv)(B)–1

clarifies that, for example, if applicable State law requires a debt collector who is collecting

time-barred debt to disclose to the consumer that the law limits how long a consumer can be sued

on a debt and that the debt collector cannot or will not sue the consumer to collect it, the debt

collector may include that disclosure on the front of the validation notice. New comment

34(d)(3)(iv)(B)–1 also includes a cross-reference to the definition of time-barred debt under

§ 1006.26(a)(2) and clarifies that, for purposes of § 1006.34(d)(3)(iv)(B), time-barred debt

disclosures may include disclosures about revival of debt collectors’ right to bring a legal action

to enforce the debt. The Bureau concludes that providing additional flexibility to debt collectors

to make these optional disclosures either on the front or reverse of the validation notice is

warranted in view of circumstances in which it may be difficult to discern under applicable State

or local law whether time-barred debt disclosures must appear on the front of a validation notice.

Moreover, the Bureau is finalizing § 1006.34(d)(3)(iv)(B) in view of the Bureau’s decision not to

finalize a requirement for debt collectors to provide disclosures relating to time-barred debt or

revival laws, described in more detail in the section-by-section analysis of § 1006.26.

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To permit this a dditional f lexibility for tim e-barred debt disclosures as distinguished from other disclosures made

under a pplicable la w, the f inal rule ha s re-numbered proposed § 1006.34(d)(3)(iv), which would have specified that

the a pplicable la w disclosures are placed on the reverse side of the validation notice only, as § 1006.34(d)(3)(iv)(A).

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As with other disclosures required by or providing sa fe harbors under a pplicable la w, debt collectors can also

m a ke the time-barred debt disclosures on the reverse of the validation notice pursuant to § 1006.34(d)(3)(iv)(A).

See comment 34(d)(3)(iv)(A)–1, which gives an example of a time-barred debt disclosure as a disclosure permitted

by § 1006.34(d)(3)(iv)(A).

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The Bureau received feedback about modifying the scope of proposed

§ 1006.34(d)(3)(iv). An industry trade group commenter stated that the Bureau should limit

§ 1006.34(d)(3)(iv) to State laws and exclude disclosures required by judicial decisions or

orders. According to the commenter, courts should not be permitted to dictate non-standard

disclosures that would limit the efficacy of the model validation notice and result in validation

notices that vary by jurisdiction. This commenter asserted that permitting courts to vary the

model validation notice would be inconsistent with the framework in other consumer financial

laws and regulations, such as TILA and Regulation Z, which do not permit courts to add

disclosures to model forms. A group of consumer advocate commenters asked the Bureau to

prohibit debt collectors from including disclosures that are permitted, but not required, by

applicable law, because including all possible disclosures would overwhelm consumers. On the

other hand, an industry trade group commenter asked the Bureau to allow debt collectors to

include such disclosures.

The Bureau determines that § 1006.34(d)(3)(iv) should cover disclosures required

pursuant to judicial or administrative decisions or orders, including administrative consent

orders. Permitting disclosures required by judicial or administrative decisions or orders to

appear, like any State-law-required disclosures, on the reverse of a validation notice will neither

undermine the efficacy of the model validation notice nor create validation notices that

significantly vary by jurisdiction, other than on the reverse of the notice. Further, the Bureau

concludes that permitting judicially mandated disclosures to appear on validation notices is not

inconsistent with other consumer financial laws, as some commenters suggested. For instance,

the Bureau understands that nothing in TILA and its implementing Regulation Z prohibit, as

those commenters appeared to believe, creditors from making disclosures required pursuant to

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judicial orders or decisions. As noted above, final comment 34(d)(3)(iv)(A)–1 clarifies that the

disclosures permitted by § 1006.34(d)(3)(iv) include specific disclosures required by judicial

decisions or orders.

In response to feedback, the Bureau also is finalizing § 1006.34(d)(3)(iv)(A) and

comment 34(d)(3)(iv)(A)–1 to permit debt collectors to include disclosures that provide safe

harbors under applicable law without losing the safe harbor for compliance under

§ 1006.34(d)(2). Such disclosures can mitigate legal risks for debt collectors and reduce the

potential for consumer harm.

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On the other hand, the Bureau declines to allow debt collectors

to include disclosures on the validation notice that are merely permitted by other applicable law

and still retain the safe harbor.

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Such disclosures may be irrelevant to consumers, and their

inclusion on the validation notice may overwhelm consumers or overshadow more relevant

disclosures. Nevertheless, as noted elsewhere, a debt collector who included such a disclosure

would not necessarily violate Regulation F; that debt collector would, however, be outside the

safe harbor for compliance.

Some commenters suggested that the Bureau revise the text and placement of the

§ 1006.34(d)(3)(iv) disclosure that appeared on the model validation notice. An industry trade

group commenter noted that Wisconsin law allows disclosures on the reverse of the notice but

requires the statement, “Notice: See Reverse Side for Important Information.” A group of

consumer advocate commenters suggested that disclosures required by applicable law should be

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Avila, 817 F.3d at 76 (a dopting the safe harbor a pproach for debt collectors disclosing the amount of the debt

when the balance may increase due to interest and fees a dopted in Miller v. McCalla, Raymer, Padrick, Cobb,

Nichols, & Clark, LLC, 214 F.3d 872, 876 (7th Cir. 2000)).

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As discussed earlier in this section-by-section a nalysis, § 1006.34(d)(3)(iv) has been revised in the final rule to

cla rify that the optional disclosures are those that are “specifically” required by a pplicable la w or that provide a sa fe

harbor under applicable law.

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separately labeled as “Disclosures Required by Your State” and “Disclosures Required by Local

Federal Courts.”

Relatedly, some commenters noted that some State laws include specific prominence or

font size requirements for validation notice disclosures. A comment letter from two associations

of State regulatory agencies expressed concerns that proposed § 1006.34(d)(3)(iv), as disclosed

on the model validation notice, was not sufficiently prominent. In particular, these commenters

objected that the statement about disclosures required by applicable law appeared below the

§ 1006.34(d)(3)(iii)(A) payment disclosure.

In response to feedback, the Bureau is including a new comment 34(d)(3)(iv)(A)–2 to

clarify how the disclosure described in § 1006.34(d)(3)(iv)(A) may appear depending on the

delivery mechanism. The comment clarifies that, if a debt collector includes disclosures

pursuant to § 1006.34(d)(3)(iv)(A), the debt collector must include a statement on the front of the

validation notice referring to those disclosures; and a debt collector may comply with the

requirement to refer to the disclosures by including on the front of the validation notice the

statement, “Notice: See reverse side for important information,” or a substantially similar

statement. The comment further notes that if, as permitted by comment 34(d)(3)(iv)(A)–1, a

debt collector places the disclosures below the content of the validation notice, the debt collector

may comply with the requirement to refer to the disclosures by stating, “Notice: See below for

important information,” or a substantially similar statement.

In response to feedback, the Bureau is also modifying how the statement required by

§ 1006.34(d)(3)(iv) is disclosed on the model validation notice. Specifically, the

§ 1006.34(d)(3)(iv) statement appears on the final model notice as: “Notice: See Reverse Side

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for Important Information.”

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The Bureau finds that this phrase is clearer, more conspicuous,

and more likely to encourage consumer action than the proposed phrase, “Review state law

disclosures on reverse side, if applicable.” Finally, the Bureau declines the suggestion to require

debt collectors to label which disclosures are included pursuant to State law and which are

included pursuant to judicial orders and decisions. That distinction likely makes little practical

difference to consumers.

The Bureau also determines that the § 1006.34(d)(3)(iv) disclosure should be more

prominent than in the proposed model validation notice, in part to account for the fact noted by

some commenters that disclosures required by other applicable law may have prominence

requirements, including clear and conspicuous requirements. The Bureau therefore has modified

the model validation notice to further emphasize the § 1006.34(d)(3)(iv) disclosure. Specifically,

in contrast to the proposed model validation notice, on which the disclosure appeared in regular

font in the middle of a list of other disclosures, the disclosure appears on the final model

validation notice underlined and in bold font and separated from other disclosures.

Commenters sought additional guidance about what constitutes the “reverse side” of the

validation notice. Two industry trade group commenters recommended that the Bureau interpret

“reverse side” as synonymous with “next page” to allow debt collectors to use a second page to

provide disclosures required by other applicable law. Relatedly, one commenter stated that

requiring a debt collector to print on both sides of a validation notice would increase costs. Two

associations of State regulatory agencies asked the Bureau to clarify where State law disclosures

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The Bureau based this sta tement on a Wisconsin disclosure requirement. See Wis. Admin. Code DFI-Bkg

sec. 74.13.

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should be placed on validation notices delivered electronically, since disclosures delivered

electronically will not have a reverse side.

The Bureau recognizes that the meaning of “on the reverse” may vary by delivery method

and format and that clarification is warranted, particularly as to validation notices delivered

electronically. As such, the Bureau is adopting new comment 34(d)(3)(iv)(A)–1, which clarifies,

in relevant part, that if a debt collector provides a validation notice in the body of an email, the

debt collector may, in lieu of including the disclosures permitted by § 1006.34(d)(3)(iv)(A) on

the reverse of the validation notice, include them in the same communication below the content

of the validation notice. Furthermore, as discussed above, comment 34(d)(3)(iv)(A)–2 notes

that, if a debt collector places the disclosures below the content of the validation notice, the debt

collector may comply with the requirement to refer to the disclosures by including the statement,

“Notice: See below for important information,” or a substantially similar statement. These

commentary provisions, therefore, address circumstances in which the validation notice is

delivered in the body of an email.

The Bureau declines to permit debt collectors to place disclosures required by other

applicable law on a second page while maintaining the § 1006.34(d)(2) safe harbor, as some

commenters requested. In § 1006.34(d)(2)(ii), the Bureau specifies two narrow circumstances in

which debt collectors are permitted to include validation information on a second page because

such information, presented on a second page, is likely to benefit consumers.

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And, in both

cases, if a debt collector includes the disclosures on a second page, the debt collector loses the

§ 1006.34(d)(2) safe harbor with respect to the second page. The Bureau determines that it is

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Fina l § 1006.34(d)(2)(ii) allows a second page for debt collectors to provide information that would otherwise be

provided in a rela tively a bbreviated itemization of the debt (i.e., itemization on a second page and for the special

rule regarding certain residential mortgage debt). This narrow exception allows the debt collector to potentially

provide significantly more information to the consumer on a second page.

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unwarranted to provide a safe harbor that would be more expansive both in scope and protection

than the other targeted exceptions to debt collectors providing other applicable law disclosures

on a second page. The Bureau notes that debt collectors may include such disclosures on a

second page without necessarily violating the rule.

The Bureau is making one additional change not in response to comments.

Section 1006.34(d)(3)(iv)(A) provides, in relevant part, that disclosures made under

§ 1006.34(d)(3)(iv) must not appear directly on the reverse of the consumer-response

information required by § 1006.34(c)(4), which appears on the front of the notice. This revision

is included to ensure that debt collectors who choose to make the optional disclosures under

§ 1006.34(d)(3)(iv) do not provide the disclosures in a place where the disclosures would be

returned with the consumer-response information.

The Bureau notes that if, as permitted by § 1006.34(d)(3)(iv), a debt collector includes on

the front of a validation notice the required statement regarding disclosures under other

applicable law (i.e., “Notice: See reverse side for important information”), the debt collector

must actually place such disclosures on the reverse. Conversely, a debt collector may not

include disclosures under other applicable law on the reverse of a validation notice without

including the statement about those disclosures on the front of the validation notice. The Bureau

intended this effect when it proposed § 1006.34(d)(3)(iv) and notes it here for clarity.

Accordingly, the Bureau is finalizing § 1006.34(d)(3)(iv) and its related commentary

with both substantive revisions and minor wording changes.

34(d)(3)(v) Information about Electronic Communications

Proposed § 1006.34(d)(3)(v) provided that debt collectors could include certain

information about electronic communications along with the validation information. First,

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proposed § 1006.34(d)(3)(v)(A) provided that a debt collector could include the debt collector’s

website and email address. Second, proposed § 1006.34(d)(3)(v)(B) provided that a debt

collector could include, for validation information not provided electronically, the statement

described in § 1006.34(c)(3)(v) explaining how a consumer could take the actions described in

§ 1006.34(c)(4) and § 1006.34(d)(3) electronically.

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One industry commenter supported

proposed § 1006.34(d)(3)(v), and the Bureau is finalizing it as proposed, with technical revisions

to reflect conforming changes to final § 1006.34(c)(3)(v). For example, final

§ 1006.34(d)(3)(v)(B) no longer contains a reference to § 1006.34(d)(3) because final

§ 1006.34(c)(3)(v) itself no longer refers to § 1006.34(d)(3).

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34(d)(3)(vi) Spanish-Language Translation Disclosures

Proposed § 1006.34(d)(3)(vi) provided that a debt collector could include, along with the

validation information, optional Spanish-language disclosures that consumers could use to

request a Spanish-language validation notice. The proposal stated that Spanish-speaking LEP

consumers may benefit from a Spanish-language disclosure informing them of their ability to

request a Spanish-language translation, if a debt collector chooses to make such a translation

available.

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The proposal stated that debt collectors may wish to provide validation information

in Spanish, as doing so may facilitate their communications with consumers.

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Proposed § 1006.34(c)(3)(v) provided that such a statement was required validation information for validation

notices provided electronically.

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As discussed in the section-by-section a nalysis of § 1006.34(c)(3)(v), the final rule does not require debt

collectors who provide validation notices electronically to include statements explaining how consumers can take

the actions described in § 1006.34(d)(3) electronically.

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Spanish speakers represent the second-largest la nguage group in the United States after English speakers. As of

2016, 40 million residents in the United States ages five and older spoke Spanish at home. See U.S. Census Bureau,

Profile America for Facts for Features CB17–FF.17: Hispanic Heritage Month 2017, at 4 (Oct. 17, 2017),

https://www.census.gov/newsroom/facts-for-features/2017/hispanic-heritage.html.

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Consumer advocate commenters generally supported permitting debt collectors to

provide certain Spanish-language disclosures along with the validation information. Some

consumer advocate commenters recommended that the Bureau also require debt collectors to

provide the disclosures described in proposed § 1006.34(d)(3)(vi). A group of consumer

advocate commenters urged the Bureau to require a debt collector to send a translated validation

notice if the debt collector receives a request from a consumer seeking information in the

consumer’s preferred language, including a request received using the proposed tear off portion

of the validation notice.

An industry commenter supported proposed § 1006.34(d)(3)(vi) on the understanding

that the Spanish-language disclosures would be optional. According to the commenter, requiring

debt collectors to provide foreign language disclosures would entail significant costs. An

industry commenter and an industry trade group commenter asked the Bureau to clarify whether

providing the proposed § 1006.34(d)(3)(vi) disclosures would obligate a debt collector to provide

future communications in Spanish to the consumer. Some commenters raised questions about

whether the validation period would be paused when a consumer requests a Spanish-language

translation of the validation notice and then restart when it is received, with a local government

commenter supporting such a revision in the final rule.

The Bureau declines to make the Spanish-language disclosures described in

§ 1006.34(d)(3)(vi) mandatory. A requirement to provide the § 1006.34(d)(3)(vi) disclosures,

standing alone, would not be overly burdensome because the translation language is precisely

described in the regulation and is also included on the model validation notice. However, the

content of those disclosures means that mandating them would effectively compel debt collectors

to provide translated validation notices to certain consumers (i.e., consumers who respond to the

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§ 1006.34(d)(3)(vi) disclosures by requesting a Spanish-language validation notice).

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discussed in the proposal, the Bureau did not propose to require debt collectors to provide

translated validation notices because of the associated costs of such a requirement,

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and the

Bureau is declining to finalize such a requirement in this final rule.

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A debt collector who provides the optional disclosure described in § 1006.34(d)(3)(vi)

must honor a consumer’s request for a translated validation notice or risk violating FDCPA

section 807. However, the proposal did not expressly state that the debt collector would be

obligated to provide the Spanish-language translation of the validation notice in this

circumstance. The proposal only implied such an obligation. To make the rule clearer, the

Bureau is finalizing a new § 1006.34(e)(2), which provides that a debt collector who includes in

the validation information either or both of the optional disclosures described in

§ 1006.34(d)(3)(vi), and who thereafter receives a request from the consumer for a Spanish-

language validation notice, must provide the consumer a validation notice completely and

accurately translated into Spanish.

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The Bureau clarifies that, other than with respect to

§ 1006.34(e)(2), nothing in the rule obligates a debt collector to provide future communications

in Spanish solely because the debt collector provided a disclosure described in

§ 1006.34(d)(3)(vi) in Spanish.

Regarding the commenters who asked for clarification about, or supported, restarting the

validation period when the consumer requests a Spanish-language validation notice, the Bureau

declines to mandate such a change but notes that debt collectors who voluntarily restart the

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15 U.S.C. 1692e.

362

84 FR 23274, 23352 (May 21, 2019).

363

See the section-by-section analysis of § 1006.34(e).

364

Id.

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validation period after providing a copy of the Spanish-language validation notice following the

consumer’s request do not violate the FDCPA or Regulation F.

For these reasons, the Bureau is finalizing § 1006.34(d)(3)(vi) largely as proposed but

with a revision to clarify that a debt collector may include either of the optional Spanish-

language translation disclosures, or both of them.

34(d)(3)(vi)(A)

Proposed § 1006.34(d)(3)(vi)(A) provided that a debt collector could include a statement

in Spanish informing a consumer that the consumer could request a Spanish-language validation

notice. Specifically, the Bureau proposed in § 1006.34(d)(3)(vi)(A) to permit the statement,

“Póngase en contacto con nosotros para solicitar una copia de este formulario en español,” using

that phrase or a substantially similar phrase in Spanish. In English, this phrase means, “You may

who provided this optional disclosure could also include supplemental information in Spanish

specifying how a consumer could request a Spanish-language validation notice. Proposed

comment 34(d)(3)(vi)(A)–1 explained that, for example, a debt collector could provide a

statement in Spanish that a consumer could request a Spanish-language validation notice by

telephone or email.

Consumer advocate commenters supported the Spanish-language disclosure described in

proposed § 1006.34(d)(3)(vi)(A). The Bureau received no other comments specifically

addressing the disclosure. Accordingly, the Bureau is finalizing § 1006.34(d)(3)(vi)(A) and its

related commentary as proposed, with only minor wording changes.

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34(d)(3)(vi)(B)

Proposed § 1006.34(d)(3)(vi)(B) provided that debt collectors could include in the

consumer-response information section of the validation notice a statement in Spanish that a

consumer could use to request a Spanish-language validation notice. Specifically, the Bureau

proposed in § 1006.34(d)(3)(vi)(B) to permit debt collectors to include the statement, “Quiero

esta forma en español,” using that phrase or a substantially similar phrase in Spanish. In English,

this phrase means, “I want this form in Spanish.” Proposed § 1006.34(d)(3)(vi)(B) would have

required this statement to be next to a prompt that the consumer could use to request a Spanish-

language validation notice.

Consumer advocate commenters generally supported the Spanish-language disclosure

described in proposed § 1006.34(d)(3)(vi)(B). However, a group of consumer advocate

commenters stated that the Spanish translation in proposed § 1006.34(d)(3)(vi)(B) was

inaccurate. Specifically, the commenters stated that the correct Spanish translation of “form” is

“formulario,” not “forma.” The word “forma” appeared in both proposed § 1006.34(d)(3)(vi)(B)

and in the sample disclosure on the proposed model validation notice. The Bureau finds that

“formulario,” not “forma,” is the correct Spanish translation of “form.” The Bureau also finds

that, for gender agreement, § 1006.34(d)(3)(vi)(B) should read “este formulario,” not “esta

formulario.”

The Bureau is finalizing § 1006.34(d)(3)(vi)(B), its related commentary, and the

disclosure on the model validation notice as proposed, but with revisions to correct the

translation errors and with other, minor wording changes for consistency with other provisions of

the final rule.

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34(d)(3)(vii)

The Bureau proposed § 1006.34(c)(2)(iii) to provide that the merchant brand, if any,

associated with a credit card debt, to the extent available to the debt collector, is validation

information that must be provided to the consumer. Proposed comment 34(c)(2)(iii)–1 provided

an example of merchant brand information that the Bureau initially determined would be

available to a debt collector and that, therefore, would be required on a validation notice.

For the reasons discussed below, the Bureau is not finalizing § 1006.34(c)(2)(iii) and its

related commentary. Instead, the Bureau is restructuring and renumbering proposed

§ 1006.34(c)(2)(iii) as a new optional disclosure under § 1006.34(d)(3)(vii), which permits, but

does not require, debt collectors to disclose the merchant brand, affinity brand, or facility name,

if any, associated with the debt (and does not limit the optional disclosure to credit card debt).

Industry, industry trade group, and consumer advocate commenters uniformly agreed

that, if available, merchant brand information may help consumers recognize debts. For

example, consumer advocate commenters stated that, in the case of a store-branded credit card, a

consumer may not associate the debt with the original creditor (often a bank) and may be more

likely to recognize the merchant, whose name appears on the credit card. A group of consumer

advocate commenters asserted that such information was important, impliedly suggesting that the

Bureau require its disclosure as part of the validation information.

Although supportive of the proposed disclosure in principle, some industry trade group

commenters asked the Bureau to clarify the circumstances in which merchant brand information

would be deemed available. According to these commenters, whether merchant brand

information is available may be unclear because it is not always identifiable in a consumer’s file

or a creditor may not have provided it. One industry trade group commenter stated that the

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proposed provision requiring disclosure of merchant brand information for credit cards as part of

the validation information would better serve consumers and reduce compliance costs if the

provision included broader categories than merchant brand names and was an optional, rather

than mandatory, disclosure.

The Bureau received other comments about expanding the scope of proposed

§ 1006.34(c)(2)(iii). An industry trade group commenter recommended that § 1006.34(c)(2)(iii)

also encompass affinity brand information (e.g., the name of a college). Other commenters

recommended that debt collectors be permitted or required to disclose the facility name

associated with a medical debt (e.g., the name of a hospital). According to commenters, a

consumer may be more likely to recognize a facility where treatment was provided than the

healthcare service provider that is the creditor. A group of consumer advocate commenters

noted that increasingly a hospital name may act as a brand for an umbrella of service providers

and thus should be treated in the same manner as a merchant brand.

The Bureau determines that merchant brand information may help consumers recognize

debts. However, the Bureau agrees with the feedback that whether merchant brand information

is available may not always be clear to a debt collector. This ambiguity is particularly likely

with respect to debts that have been sold or transferred multiple times. Furthermore, not all

creditors will have an associated merchant brand, at least one that is distinct from the creditor

name.

Accordingly, in lieu of finalizing the requirement in proposed § 1006.34(c)(2)(iii), the

Bureau is adopting new § 1006.34(d)(3)(vii), which permits, rather than requires, debt collectors

to disclose the merchant brand information, if any, associated with a debt. By making merchant

brand an optional disclosure, the Bureau eliminates a source of potential ambiguity that could

241

expose debt collectors to legal risk. In addition, notwithstanding this modification, the Bureau

concludes that debt collectors will be incentivized to provide merchant brand information if it is

available. Commenters uniformly agreed that merchant brand information helps consumers

recognize debts.

365

Thus, debt collectors likely will benefit from including merchant brand

information if possible.

Providing merchant brand information will also benefit consumers by

allowing them to more easily identify debts, determine whether they owe them, and avoid the

confusion resulting from seeing a validation notice with an unfamiliar name (which potentially

leads to the consumer ignoring the notice).

The Bureau finds that affinity brand information and facility name information also may

help consumers recognize debts they owe. Whereas a merchant brand can be generally

understood as the labelling or branding of a commercial entity, such as a retail store, an affinity

brand may reflect the labelling or branding of an entity that is not necessarily commercial but

one with which the consumer has a relationship. For example, a higher education institution

(e.g., “College of Columbia”) or a charity may be associated with a consumer financial product

(e.g., a credit card provided by “ABC Bank”) as an affinity brand. See comment 34(d)(3)(vii)–2.

Moreover, facility name information (e.g., “ABC Hospital”) may prove more recognizable to

consumers with respect to a medical debt than the name of, for example, the physicians group or

laboratory that is the actual creditor (particularly if the consumer has one appointment or

procedure at one facility that results in multiple bills from multiple providers). See comment

365

See 84 FR 23274, 23340 (May 21, 2019) (citing the Bureau’s consumer focus group findings that indicate

consumers use merchant brands to recognize credit card debts).

242

34(d)(3)(vii)–3. Thus, § 1006.34(d)(3)(vii) also permits debt collectors to disclose an affinity

brand or a facility name, if any, associated with a debt.

366

For these reasons, the Bureau is finalizing § 1006.34(d)(3)(vii) to provide that, along with

the validation information, debt collectors may disclose the merchant brand, affinity brand, or

facility name, if any, associated with a debt. The Bureau also is adopting new comments

34(d)(3)(vii)–1 through –3 to provide examples of a merchant brand, an affinity brand, and a

facility name, respectively.

34(d)(3)(viii)

The Bureau is finalizing § 1006.34(d)(3)(viii) to provide that, although it is not required,

a debt collector who is collecting debt not related to a consumer financial product or service may

disclose certain additional information without losing the safe harbor provided by

§ 1006.34(d)(2) (assuming the debt collector otherwise satisfies the conditions for the safe

harbor). Specifically, § 1006.34(d)(3)(viii) provides that, if a debt collector is collecting debt

other than debt related to a consumer financial product or service as defined in § 1006.2(f), the

debt collector may disclose: (1) the name of the creditor to whom the debt was owed on the

itemization date (i.e., the information specified in § 1006.34(c)(2)(iii)); or (2) a statement that

informs the consumer that additional information regarding consumer protections in debt

collection is available on the Bureau’s website at www.cfpb.gov/debt-collection (i.e., the

information specified in § 1006.34(c)(3)(iv)). The Bureau determines that receipt of this

information may be helpful for consumers.

366

Although § 1006.34(d)(3)(vii) permits debt collectors to disclose the f acility name associated with a medical debt

along with the validation information, debt collectors m ay be prohibited from doing so by other a pplicable la ws,

such as healthcare privacy rules or regulations.

243

34(d)(4) Validation Notices Delivered Electronically

As discussed in the proposal and in the November 2020 Final Rule, promoting electronic

communications may benefit consumers and debt collectors.

367

As also discussed in the

proposal, allowing debt collectors to make certain formatting modifications to validation notices

delivered electronically may help consumers exercise their verification rights under FDCPA

section 809 and may facilitate a debt collector’s ability to process and understand a consumer’s

response to such an electronically delivered validation notice. Proposed § 1006.34(d)(4)

therefore provided several modifications, discussed in the section-by-section analysis of

§ 1006.34(d)(4)(i) and (ii) below, that a debt collector could make, at its option, to the formatting

of a validation notice delivered electronically.

An industry trade group commenter expressed support for proposed § 1006.34(d)(4)’s

facilitation of validation notices delivered electronically. The Bureau received no other

comments specifically addressing proposed § 1006.34(d). Accordingly, the Bureau is finalizing

§ 1006.34(d)(4) with only minor wording changes.

The Bureau is finalizing § 1006.34(d)(4) to implement and interpret FDCPA section

809(b) by establishing formatting requirements that facilitate the consumer’s right to dispute a

debt and request original-creditor information, and pursuant to its FDCPA section 814(d)

authority to prescribe rules with respect to the collection of debts by debt collectors. The Bureau

also is finalizing § 1006.34(d)(4) pursuant to its authority under section 1032(a) of the Dodd-

Frank Act to prescribe rules to ensure that the features of consumer financial products and

services are disclosed fully, accurately, and effectively.

367

See 84 FR 23274, 23351 (May 21, 2019); 85 FR 76734, 76755 (Nov. 30, 2020).

244

34(d)(4)(i) Prompts

Proposed § 1006.34(d)(4)(i) provided that a debt collector delivering a validation notice

electronically pursuant to § 1006.42 could display any prompt required by § 1006.34(c)(4)(i) or

(ii) or (d)(3)(iii)(B) or (vi)(B) as a fillable field.

368

One industry trade group commenter supported proposed § 1006.34(d)(4)(i). According

to the commenter, if a validation notice is delivered by email, a debt collector should be

permitted to format the prompts in the consumer-response information section so that the debt

collector receives an email if a consumer selects them. Another industry trade group commenter

asked the Bureau to clarify whether a fillable field includes a checkbox.

A consumer advocate commenter raised concerns about permitting a debt collector to

format the payment prompt described in § 1006.34(d)(3)(iii)(B) as a fillable field. According to

the commenter, scammers could impersonate legitimate debt collectors and attempt to convince

consumers to make payments on fraudulent debts using the payment prompts. The commenter

urged the Bureau to evaluate the security risks associated with fillable payment prompts and

consider other approaches.

The Bureau determines that allowing a debt collector to design a validation notice

delivered electronically to include fillable prompts will benefit consumers and industry by

making it easier for consumers to exercise their verification rights, make a payment, or request a

Spanish-language translation of the notice. The Bureau does not find that permitting a debt

collector to format the payment prompt described in § 1006.34(d)(3)(iii)(B) as a fillable field

entails substantial security risks. The Bureau acknowledges that, in general, electronic

communications present certain security risks to consumers. However, the Bureau finds that

368

84 FR 23274, 23405 (May 21, 2019).

245

these general risks do not justify preventing debt collectors from including in electronic

communications common design modifications, such as prompts, that are convenient to

consumers. Thus, the Bureau declines to limit the ability of legitimate debt collectors to include

on validation notices a common design modification that will benefit consumers.

369

Accordingly, the Bureau is finalizing § 1006.34(d)(4)(i) largely as proposed, with only

minor wording changes for consistency with other provisions in the final rule.

34(d)(4)(ii) Hyperlinks

Proposed § 1006.34(d)(4)(ii) provided that a debt collector delivering a validation notice

electronically could embed hyperlinks in the validation notice that, when clicked, would connect

consumers to the debt collector’s website or permit consumers to dispute a debt or request

original-creditor information.

Industry trade group commenters supported proposed § 1006.34(d)(4)(ii). For example, a

commenter stated that hyperlinks are an important feature used to reduce the complexity of email

and text messages while allowing readers to access important information. A consumer advocate

commenter recommended that the Bureau also permit debt collectors to embed a hyperlink that

connects consumers to the Bureau’s website address described in § 1006.34(c)(3)(iv).

The Bureau determines that hyperlinks are a formatting modification that may benefit

consumers and debt collectors if included in validation notices that are delivered electronically.

And the Bureau agrees that debt collectors should be permitted to include a hyperlink that

connects consumers to the Bureau’s website address described in § 1006.34(c)(3)(iv).

Accordingly, the Bureau is finalizing § 1006.34(d)(4)(ii) to provide that debt collectors may

369

With respect to the comment about whether a fillable field includes a checkbox, the Bureau confirms that a

filla ble field m a y a ppear a s a n unmarked checkbox that a consumer ca n select.

246

embed hyperlinks that, when clicked, connect consumers to the debt collector’s website, connect

consumers to the Bureau’s debt collection website as disclosed pursuant to § 1006.34(c)(3)(iv),

or permit consumers to dispute the debt or request original-creditor information.

34(e) Translation into Other Languages

The Bureau proposed § 1006.34(e) to provide that a debt collector could send a consumer

a validation notice completely and accurately translated into any language if the debt collector

also sent an English-language validation notice that satisfied § 1006.34(a)(1). Proposed

§ 1006.34(e) also provided that, if a debt collector already provided a consumer an English-

language validation notice that satisfied § 1006.34(a)(1) and subsequently provided the consumer

a validation notice translated into any other language, the debt collector would not need to

provide an additional copy of the English-language notice. Proposed comment 34(e)–1 clarified

that the language of a validation notice obtained from the Bureau’s website would be considered

a complete and accurate translation, although debt collectors would be permitted to use other

validation notice translations if they were accurate and complete.

Industry and industry trade group commenters supported proposed § 1006.34(e) and its

optional approach to providing validation notices translated into other languages. An industry

trade group commenter stated that this approach was appropriate because some debt collectors

may not have the resources to conduct collections activities in languages other than English.

Other industry trade group commenters stated that requiring debt collectors to provide validation

notices in other languages would be burdensome and costly. An industry trade group commenter

stated that, if a debt collector provided a validation notice in another language, a consumer

would expect the debt collector to communicate in that language. According to this commenter,

247

if the debt collector was unable to do so, this unfulfilled expectation would frustrate consumers

and expose debt collectors to litigation risk.

Other commenters, including consumer advocates, legal aid providers, and faith groups,

recommended that debt collectors be required to provide non-English validation notices to LEP

consumers. According to these commenters, LEP consumers tend to experience poverty at much

greater rates, face significant challenges navigating the debt collection process, and are often

subject to harassment and deception. Commenters stated that English-language validation

notices would not enable LEP consumers to understand their rights in debt collection or to take

appropriate action if they did not believe that they owed a debt. Commenters cited demographic

statistics showing the growing population of LEP consumers, particularly in certain localities. A

consumer advocate commenter stated that case law suggests that a debt collector’s failure to

provide a non-English validation notice to an LEP consumer may violate the FDCPA.

370

To address these concerns, these commenters suggested various mandatory frameworks

that would require debt collectors to provide translated validation notices to consumers. These

suggested alternative frameworks included requiring debt collectors to provide a translated

validation notice: (1) in Spanish and located on the back of every English-language validation

notice; (2) with every English-language validation notice if the debt collector knows or should

know the consumer has another language preference; (3) if the original transaction or the debt

collector’s prior communication was conducted in a foreign language; (4) upon a consumer’s

370

The commenter cited, for example, Evory v. RJM Acquisitions Funding LLC, 505 F.3d 769, 774 (7th Cir. 2007).

However, the Bureau disagrees with the commenter’s premise that this opinion and the others it cited im ply a

general requirement under the FDCPA to provide translated notices to all Spanish-speaking LEP consumers. The

Bureau believes, instead, that those holdings were dependent on the facts of those cases. For example, Evory

discussed in dicta a hypothetical in which a debt collector targeted vulnerable Spanish-speaking LEP consumers

with English-language validation notices, 505 F.3d at 774, but that particular scenario involved targeting, which is

beyond the scope of § 1006.34(e).

248

request; (5) if the debt collector received information in the file from the creditor or a prior debt

collector indicating the consumer’s non-English language preference; or (6) if and when the debt

collector at a later point communicates with the consumer in a foreign language. In some cases,

commenters framed these interventions as narrow or measured. A group of consumer advocates

also urged the Bureau to make available on its website Spanish-translated validation notices as

well as translations in the next seven most common languages spoken by LEP consumers in the

United States.

The Bureau determines that LEP consumers may benefit from translated validation

notices. Further, some debt collectors may want to provide translated validation notices to LEP

consumers, if doing so is consistent with their business practices.

The Bureau, however, declines commenters’ requests to require debt collectors to provide

a Spanish-language translation to all consumers on the back of every English-language validation

notice or a translated notice to consumers in other languages if the debt collector knows or

should know the consumer has a different language preference. As discussed in the proposal,

371

these types of mandatory approaches would result in significant, industry-wide costs on both an

upfront (implementation) basis and an ongoing basis, especially for smaller debt collectors and in

connection with translations of the validation notice in languages whose use is not prevalent in

the United States.

372

The Bureau acknowledges that some LEP consumers may experience

particular challenges in the debt collection process. However, commenters did not provide

information about the costs and benefits of requiring debt collectors to provide translated

validation notices to all consumers, regardless of whether the consumer requests the translation,

371

See also the section-by-section analysis of § 1006.34(d)(3)(vi).

372

See 84 FR 23274, 23352 (May 21, 2019).

249

that persuades the Bureau that such mandatory requirements are justified. The Bureau, as stated

above, recognizes the benefits of providing translated disclosures to consumers. However, the

Bureau concludes that the approach in the proposal, supplemented by certain changes in the final

rule, strikes a better balance than a mandatory requirement. The final rule permits debt

collectors to provide disclosures carrying safe harbor protection that notify and encourage

consumers to request a Spanish-language translation of the validation notice or additional

information in Spanish, which can assist the largest group of LEP consumers in the United States

by a wide margin compared to other languages. At the same time, the final rule does not require

debt collectors to provide all consumers with translated validation notices, whether in Spanish or

other languages, and irrespective of whether the consumers request it or speak a language that is

uncommon among LEP consumers in the United States.

Regarding the request by a group of consumer advocate commenters that the Bureau

translate the validation notice into Spanish and seven other languages and deem the Bureau

translations as complete and accurate, the Bureau plans to make available on its website, prior to

the effective date of the final rule, a Spanish-language translation of the validation notice, and it

will consider taking such action in the future with respect to one or more of the other languages

cited by these commenters following implementation of the final rule.

The Bureau also declines to implement the other mandatory approaches suggested by

consumer advocate, faith group, and legal aid provider commenters. As discussed above, these

commenters suggested a variety of interventions, such as requiring the debt collector provide the

translated notice in circumstances in which the consumer had expressed a language preference to

a prior debt collector or the creditor and that preference is noted in the file for the debt, or in

which, at a later point in the process, the consumer communicates in a foreign language.

250

The Bureau disagrees with some commenters’ characterization of these interventions as

targeted or narrow in scope, as each suggestion would entail a mandatory requirement with

associated upfront and ongoing costs and complexity (which would be compounded if more than

one or even all of these interventions were adopted collectively). In some cases, these suggested

interventions are beyond the scope of the proposal. As to others, the Bureau concludes that the

costs of such interventions to debt collectors, particularly smaller entities, would not outweigh

the benefits to consumers because they would add undue complexity to the rule from an

operational, compliance, and supervisory perspective.

For these reasons, the Bureau declines to adopt a final rule that requires debt collectors to

provide translated validation notices. Nevertheless, because the Bureau determines that, as

discussed in the proposal, LEP consumers may benefit from receiving translated validation

notices, the Bureau is finalizing § 1006.34(e) to clarify how debt collectors may provide such

notices if they choose. The Bureau is finalizing proposed § 1006.34(e) as § 1006.34(e)(1), with

certain revisions and organizational changes for clarity; no substantive change is intended.

Furthermore, as discussed in the section-by-section analysis of § 1006.34(d)(3)(vi), the Bureau is

finalizing new § 1006.34(e)(2) to provide that, if a debt collector includes in the validation

information either or both of the optional disclosures notifying a consumer that the consumer can

request a copy of the validation notice in Spanish, the debt collector must provide the consumer a

Spanish-language validation notice if the consumer requests one. The Bureau intended this

result in the proposal and is including § 1006.34(e)(2) for clarity and in response to feedback.

Finally, the Bureau is finalizing comment 34(e)–1 with revisions to conform to the revisions and

organizational changes made to § 1006.34(e); no substantive change is intended.

251

Section 1006.38 Disputes and Requests for Original-Creditor Information

FDCPA section 809(b) requires debt collectors both to refrain from taking certain actions

during the 30 days after the consumer receives the validation information or notice described in

FDCPA section 809(a) (i.e., during the validation period) and to take certain actions if a

consumer either disputes the debt in writing, or requests the name and address of the original

creditor in writing, during the validation period. The Bureau proposed § 1006.38 to implement

and interpret FDCPA section 809(b) and (c), and the Bureau finalized the majority of proposed

§ 1006.38 in the November 2020 Final Rule.

373

The Bureau now is finalizing the remainder of

proposed § 1006.38 as follows.

Comment 38–1

The Bureau proposed comment 38–2 (renumbered in the November 2020 Final Rule as

comment 38–1) to set forth examples of written and electronic communications consumers can

use in disputing the debt or requesting the name and address of the original creditor.

374

The

second proposed example, proposed comment 38–2.ii, would have clarified that a consumer

could return to the debt collector the consumer-response form that proposed § 1006.34(c)(4)(i)

would have required to appear on the validation notice and indicate on the form a dispute or

request. The Bureau received no comments on proposed comment 38–2.ii.

375

The Bureau did

not finalize proposed comment 38–2.ii in the November 2020 Final Rule because the Bureau did

not finalize § 1006.34 as part of that final rule. The Bureau now is finalizing comment 38–2.ii as

proposed, renumbered as comment 38–1.ii, except that the Bureau is correcting a typographical

373

85 FR 76734, 74843-48, 76893 (Nov. 30, 2020).

374

84 FR 23274, 23353 (May 21, 2019).

375

The Bureau addressed comments received on other aspects of proposed comment 38–2 in the November 2020

Fina l Rule. 85 FR 76734, 76843-44 (Nov. 30, 2020).

252

error in the proposed comment such that the final comment cross references § 1006.34(c)(4)

rather than § 1006.34(c)(4)(i).

Comment 38–3

The Bureau proposed comment 38–1 (renumbered in this final rule as comment 38–3) to

clarify the applicability of § 1006.38 in the decedent debt context. Proposed comment 38–1

would have clarified that, if the consumer has not previously disputed the debt or requested the

name and address of the original creditor, then a person who is authorized to act on behalf of the

deceased consumer’s estate operates as the consumer for purposes of § 1006.38. Proposed

comment 38–1 also would have clarified that, if a person who is authorized to act on behalf of

the deceased consumer’s estate submits either a written request for original-creditor information

or a written dispute to the debt collector during the validation period, then § 1006.38(c) or (d)(2),

respectively, would require the debt collector to cease collection of the debt until the debt

collector has responded to that request or dispute.

For the reasons discussed in the section-by-section analysis of § 1006.2(e), the Bureau is

interpreting the term consumer to mean any natural person, whether living or deceased, who is

obligated or allegedly obligated to pay any debt. And, pursuant to its authority under FDCPA

section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, the

Bureau is adopting commentary clarifying how this definition operates in the decedent debt

context, including debt collectors’ obligations for providing the validation information and

responding to disputes and requests for original-creditor information. Accordingly, the Bureau is

finalizing comment 38–1 as proposed, renumbered as comment 38–3 in this final rule.

253

38(a) Definitions

38(a)(2) Validation Period

The Bureau proposed in § 1006.38(a)(2) to provide that the term validation period as

used in § 1006.38 has the same meaning given to it in proposed § 1006.34(b)(5).

376

Because the

Bureau did not finalize § 1006.34 in the November 2020 Final Rule, the Bureau finalized the

definition in § 1006.38(a)(2) with revised wording to refer to the 30-day period described in

FDCPA section 809 as defined by Regulation F.

377

The Bureau noted that it might, as part of

this final rule, revise the definition of validation period as finalized in the November 2020 Final

Rule to cross-reference any definition of that term that the Bureau adopts in this final rule. As

discussed in the section-by-section analysis of § 1006.34(b)(5), the Bureau is finalizing the

definition of validation period.

378

Therefore, the Bureau is making a technical change revising

§ 1006.38(a)(2), as finalized in the November 2020 Final Rule, to provide that the term

validation period as used in § 1006.38 has the same meaning given to it in § 1006.34(b)(5).

38(b) Overshadowing of Rights to Dispute or Request Original-Creditor Information

FDCPA section 809(b) provides that, for 30 days after the consumer receives the

validation information described in FDCPA section 809(a), a debt collector must not engage in

collection activities or communications that overshadow or are inconsistent with the disclosure

of the consumer’s right to dispute the debt or request information about the original creditor.

379

376

84 FR 23274, 23353 (May 21, 2019).

377

85 FR 76734, 76844, 76893 (Nov. 30, 2020).

378

The Bureau addresses comments received regarding the definition of validation period in the section-by-section

a nalysis of § 1006.34(b)(5).

379

This language was added to the FDCPA by the Financial Services Regulatory Relief Act of 2006, Pub. L. 109-

351, sec. 802(c), 120 Stat. 1966, 2006 (2006), after an FTC advisory opinion on the same subject. See Fed. Tra de

Com m’n, Advisory Opinion to American Collector’s Ass’n (Mar. 31, 2000) (opining that the 30-day period set forth

254

The Bureau proposed in § 1006.38(b) to implement this prohibition and generally restate the

relevant statutory language, with only minor changes for style and clarity.

380

As the Bureau discussed in the November 2020 Final Rule,

381

the Bureau received a few

substantive comments addressing proposed § 1006.38(b). Two industry commenters requested

that the final rule define the term “overshadowing.” These commenters observed that debt

collectors’ communications of validation information almost always expressly advise the

consumer of the right to dispute the debt and to request the name and address of the original

creditor. These commenters asserted that overshadowing claims are nonetheless some of the

most common allegations in FDCPA lawsuits. These commenters also requested clarity as to

whether the safe harbor in proposed § 1006.34(d)(2) for debt collectors who use the model

validation notice also would provide a safe harbor for compliance with the overshadowing

prohibition in proposed § 1006.38(b). One industry commenter requested that the final rule

clarify that credit reporting during the validation period does not constitute overshadowing.

382

In the November 2020 Final Rule, the Bureau finalized proposed § 1006.38(b) as

§ 1006.38(b)(1) and reserved § 1006.38(b)(2).

383

As noted above, proposed § 1006.38(b)

generally restated the relevant statutory language, with only minor changes for style and clarity,

and § 1006.38(b)(1) in the November 2020 Final Rule did the same. In the November 2020

Final Rule, the Bureau stated that it expected to address, as part of this final rule, the comments it

in FDCPA section 809(a) “is a dispute period within which the consumer may insist that the debt collector verify the

debt, and not a grace period within which collection efforts a re prohibited” but that “[t]he collection a gency m ust

ensure, however, that its collection activity does not overshadow and is not inconsistent with the disclosure of the

consumer’s right to dispute the debt specified by [s]ection 809(a)”).

380

84 FR 23274, 23353-54 (May 21, 2019).

381

85 FR 76734, 76844 (Nov. 30, 2020).

382

In addition, one industry commenter stated that it generally agreed with proposed § 1006.38, a nd a group of

consumer a d vocates that a ddressed proposed § 1006.38(b) did not object to the proposal.

383

85 FR 76734, 76844, 76893 (Nov. 30, 2020).

255

received requesting further clarity about the safe harbor provided by § 1006.34(d)(2), and the

Bureau reserved § 1006.38(b)(2) for that purpose.

384

After considering the comments, the Bureau is finalizing in § 1006.38(b)(2) a safe harbor

from the prohibition in § 1006.38(b)(1) against overshadowing.

385

Section 1006.38(b)(2)

provides that a debt collector who uses Model Form B–1 in appendix B of this part in a manner

described in § 1006.34(d)(2) has not thereby violated § 1006.38(b)(1). Therefore, a debt

collector who uses Model Form B–1 in appendix B to Regulation F, specified variations of the

model notice, or a substantially similar form, has not thereby violated § 1006.38(b)(1). The safe

harbor protects only the use of the model validation notice to comply with the information and

form requirements of § 1006.34(c) and (d)(1). If a debt collector uses the model validation

notice as described in § 1006.34(d)(2) and conducts other collection activities during the

validation period, the debt collector does not receive a safe harbor for those other collection

activities. A debt collector also does not receive a safe harbor for the manner in which a model

validation notice is provided, such as the envelope in which a model validation notice is

provided.

The Bureau declines to otherwise define the term “overshadow” or to clarify whether

other collection activities during the validation period either violate or comply with the

prohibition in final § 1006.38(b)(1). The Bureau finds that the safe harbor in § 1006.38(b)(2)

provides sufficient clarity for debt collectors.

384

Id.

385

Accordingly, the heading for final § 1006.38(b)(2) refers to the safe harbor, and the Bureau is revising: (1) the

heading for § 1006.38(b)(1) as finalized in the November 2020 Final Rule to clarify that that paragraph relates to the

overshadowing prohibition; and (2) § 1006.38(b)(1) to omit a reference to the fact that the Bureau may provide in

this part a safe harbor for debt collectors when they use certain Bureau-approved disclosures because the Bureau is

providing that safe harbor in this fina l rule.

256

38(c) Requests for Original-Creditor Information

FDCPA section 809(a)(5) states that the validation information a debt collector provides

to a consumer must include a statement that, upon the consumer’s written request within the 30-

day validation period, the debt collector will provide the consumer with the name and address of

the original creditor, if different from the current creditor. FDCPA section 809(b) provides that,

if a consumer requests the name and address of the original creditor in writing within 30 days of

receiving the validation information described in FDCPA section 809(a), the debt collector must

cease collection of the debt until the debt collector obtains and mails that information to the

consumer. The Bureau proposed in § 1006.38(c) to implement this prohibition and generally

restate the relevant statutory language.

As the Bureau discussed in the November 2020 Final Rule, the Bureau received a number

of comments addressing proposed § 1006.38(c).

386

Three industry commenters requested that

the final rule provide that, if a debt collector’s communication of the validation information to a

consumer identifies the original creditor, the debt collector need not give the consumer the

option of requesting original-creditor information from the debt collector. These commenters

stated that, if the original creditor has already been identified to a consumer, it would be

confusing to the consumer to provide the option to request the name and address of the original

creditor. Further, they stated, consumers could use unnecessary requests for original-creditor

information as a tactic to delay or avoid collection. One industry commenter requested that the

final rule clarify that a debt collector is not required to include original-creditor information in its

communication of validation information to a consumer. This commenter stated that lawsuits are

386

85 FR 76734, 76844-45 (Nov. 30, 2020).

257

often filed alleging that a debt collector has violated the FDCPA by not identifying the original

creditor in the validation information.

Several commenters recommended that the Bureau define “original creditor” to mean the

creditor at the time of charge off. According to an industry trade group, this definition would be

consistent with other laws, including the Uniform Rules for New York State Trial Courts.

387

Other industry and industry trade group commenters stated that this definition would be

appropriate for older debts because a consumer may no longer recognize the original creditor,

particularly if an account has been sold. An industry trade group suggested that defining

“original creditor” as the creditor at the time of charge off may resolve some compliance

challenges in the retail installment sales context. According to the commenter, in retail

installment sales, the original creditor is the retail seller, not the entity that ultimately buys the

contract, and retail-seller information may not be readily available to the debt collector or helpful

to the consumer.

A group of consumer advocate commenters who addressed proposed § 1006.38(c)

generally noted the importance of original-creditor information to consumers in helping them

recognize the debt in question. One commenter stated that the rule should require debt collectors

to identify the original creditor in the validation information.

388

387

“Original creditor means the financial institution that owned the consumer credit account at the time the account

was charged off, even if that financial institution did not originate the account. Charged-off consumer debt m eans a

consumer debt that has been removed from an original creditor’s books as an asset and treated as a loss or expense.”

22 NYCRR 208.14-a(a)(2).

388

Consumer advocates also addressed the proposal’s provisions regarding electronic delivery of original-creditor

information (and other information) in proposed § 1006.42. These comments regarding electronic delivery were

addressed in the November 2020 Final Rule. Id. at 76848.

258

In the November 2020 Final Rule, the Bureau finalized proposed § 1006.38(c) as

§ 1006.38(c)(1) and reserved § 1006.38(c)(2).

389

As noted above, proposed § 1006.38(c)

generally restated the relevant statutory language, and § 1006.38(c)(1) in the November 2020

Final Rule did the same.

390

In the November 2020 Final Rule, the Bureau stated that it expected

to address, as part of this final rule, how a debt collector may respond to a request for original-

creditor information if the original creditor is the same as the current creditor, and the Bureau

reserved § 1006.38(c)(2) for that purpose.

391

The Bureau also noted that it would respond in this

final rule to the comments asking the Bureau to define the term original creditor.

The Bureau has determined that a debt collector’s communication of the validation

information must include disclosure of the option to request original-creditor information. As

noted above, FDCPA section 809(a)(5) states that the validation information must include “a

statement that, upon the consumer’s written request within the thirty-day period, the debt

collector will provide the consumer with the name and address of the original creditor, if

different from the current creditor.”

392

Because FDCPA section 809(a) requires the validation

information to include disclosure of the consumer’s right to request original-creditor information,

the Bureau finds that consumer confusion would result if the final rule were to permit a debt

collector not to respond to a consumer’s timely request for that information if the original

creditor is the same as the current creditor. Further, FDCPA section 809(b) states that “[a]ny

collection activities and communication during the 30-day period may not overshadow or be

389

Id. at 76893.

390

While this fina l rule republishes in § 1006.38(c) some of the text of § 1006.38(c)(1) as finalized in the November

2020 Final Rule, this final rule makes no change to the substance of § 1006.38(c)(1) from what the Bureau f inalized

in the November 2020 Final Rule.

391

85 FR 76734, 76845 n.557 (Nov. 30, 2020).

392

15 U.S.C. 1692g(a)(5).

259

inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name

and address of the original creditor.”

393

The Bureau therefore has determined to require a debt

collector to respond to a consumer’s request for original-creditor information if the original

creditor is the same as the current creditor.

However, the Bureau also has determined that FDCPA section 809(a)(5) and (b) permits

a debt collector to respond differently to the consumer’s request for original-creditor information

when the original creditor is the same as the current creditor. Specifically, the Bureau has

determined that FDCPA section 809(b), when read together with FDCPA section 809(a)(5),

requires the debt collector to provide the name and address of the original creditor to the

consumer only if the original creditor is different from the current creditor. Accordingly, the

Bureau is finalizing new § 1006.38(c)(2) to set forth an alternative procedure that a debt collector

may use to respond to a consumer’s request for original-creditor information if the original

creditor is the same as the current creditor. Specifically, if a debt collector receives a request for

the name and address of the original creditor submitted by the consumer in writing within the

validation period, the special rule set forth in § 1006.38(c)(2) provides that the debt collector

must cease collection of the debt until the debt collector reasonably determines that the original

creditor is the same as the current creditor and either (i) notifies the consumer in writing or

electronically in the manner required by § 1006.42 that the original creditor is the same as the

current creditor and refers the consumer to the debt collector’s earlier provision of the validation

information or (ii) satisfies § 1006.38(c)(1).

Under the final rule, a debt collector is not required to use the alternative procedure in

§ 1006.38(c)(2); a debt collector can always comply with the rule by complying with

393

15 U.S.C. 1692g(b) (emphasis a dded).

260

§ 1006.38(c)(1). By adopting the § 1006.38(c)(2) alternative procedure, the Bureau strikes the

best balance between providing debt collectors with a less burdensome method of responding to

consumer requests for original-creditor information and protecting consumers.

The Bureau adopts the alternative procedure in § 1006.38(c)(2) as an interpretation of

FDCPA section 809(a)(5) and (b), and pursuant to its authority under FDCPA section 814(d). In

particular, § 1006.38(c)(2) is an interpretation of what it means for a debt collector, pursuant to

FDCPA section 809(b), to “obtain[ ] . . . the name and address of the original creditor” and send

that information to the consumer when, pursuant to FDCPA section 809(a)(5), the debt collector

already provided the name of the current creditor to the consumer within the validation

information (as required by FDCPA section 809(a)(2) and § 1006.34(c)(2)(v)) and the original

creditor is not different from the current creditor. If the original creditor is the same as the

current creditor, the Bureau interprets FDCPA section 809(b)’s requirement to provide original-

creditor information to the consumer to mean that a debt collector must cease collection of the

debt until the debt collector either provides the name and address of the original creditor to the

consumer in compliance with § 1006.38(c)(1) or, in compliance with § 1006.38(c)(2), notifies

the consumer in writing or electronically in the manner required by § 1006.42 that the original

creditor is the same as the current creditor and refers the consumer to the debt collector’s earlier

provision of the validation information.

The Bureau declines to require all debt collectors to include the name of the original

creditor in the validation information because the Bureau believes such a requirement is not

necessary or warranted. The statute prescribes a method for a consumer to obtain this

information upon request. Further, the Bureau interprets FDCPA section 809(a)(2) as requiring

261

debt collectors to disclose in the validation information the name of the current creditor; i.e., “the

name of the creditor to whom the debt is owed.”

The Bureau declines to define “original creditor” in the manner commenters suggested.

Although the definition suggested by commenters might be accurate for some debts, it is not

clear to the Bureau that the suggested definition would be accurate for all debts. The Bureau did

not propose such a definition and the Bureau does not have sufficient information to develop and

include a definition of “original creditor” in the rule.

Taking into consideration the provisions of FDCPA section 809(a) and (b), the final rule

provides debt collectors an alternative response procedure, described above, when the original

creditor—which in many cases will be the creditor as of the itemization date—is the same as the

current creditor. The alternative procedure permits debt collectors to respond to some consumer

requests for original-creditor information in a less burdensome way, while also protecting

consumers. Therefore, the Bureau believes that defining original creditor in the final rule is

unnecessary and unwarranted.

Section 1006.42 Sending Required Disclosures

42(a) Sending Required Disclosures

42(a)(2) Exceptions

The Bureau proposed in § 1006.42(a)(2) to provide that a debt collector need not comply

with § 1006.42(a)(1) when providing the disclosure required by § 1006.6(e) or § 1006.18(e) in

writing or electronically, unless the disclosure was included on a notice required by

§ 1006.34(a)(1)(i) or § 1006.38(c) or (d)(2).

394

Because the Bureau did not finalize § 1006.34 in

the November 2020 Final Rule, the Bureau finalized § 1006.42(a)(2) with a reference to the

394

84 FR 23274, 23357-59 (May 21, 2019).

262

notice required by FDCPA section 809(a), as implemented by Regulation F, in lieu of a ref erence

to the notice required by § 1006.34(a)(1)(i).

395

Because the Bureau is now finalizing § 1006.34,

the Bureau is making a technical change revising § 1006.42(a)(2) to refer to the notice required

by § 1006.34(a)(1)(i), as originally proposed. The Bureau addressed comments received

regarding proposed § 1006.42(a)(2) in the section-by-section analysis of § 1006.42(a)(2) in the

November 2020 Final Rule.

396

42(b) Requirements for Certain Disclosures Sent Electronically

Proposed § 1006.42(b)(1) generally would have required a debt collector who provided

the validation notice described in § 1006.34(a)(1)(i)(B) electronically to do so in accordance with

section 101(c) of the E-SIGN Act.

397

Because the Bureau did not finalize § 1006.34 in the

November 2020 Final Rule, the Bureau finalized § 1006.42(b) with a reference to the notice

required by FDCPA section 809(a), as implemented by Regulation F, in lieu of a reference to the

validation notice described in § 1006.34(a)(1)(i)(B).

398

Because the Bureau is now finalizing

§ 1006.34, the Bureau is making a technical change revising § 1006.42(b) to refer to the

validation notice required by § 1006.34(a)(1)(i)(B), as originally proposed. The Bureau

addressed comments received regarding proposed § 1006.42(b)(1) in the section-by-section

analysis of § 1006.42(b) in the November 2020 Final Rule.

399

395

85 FR 76734, 76893 (Nov. 30, 2020).

396

Id. at 76850-51.

397

84 FR 23274, 23356-57 (May 21, 2019).

398

85 FR 76734, 76893 (Nov. 30, 2020).

399

Id. at 76850-51.

263

Subpart C—Reserved

Subpart D—Miscellaneous

Section 1006.100 Record Retention

100(a) In General

Section 1006.100(a), as finalized in the November 2020 Final Rule, requires a debt

collector to retain records that are evidence of compliance or non-compliance with the FDCPA

and Regulation F. The Bureau proposed comment 100–1 to clarify that, for purposes of

§ 1006.100(a), evidence of compliance includes, among other things, copies of documents

provided by the debt collector to the consumer in accordance with the requirements of proposed

§ 1006.34.

400

Because the Bureau did not finalize § 1006.34 in the November 2020 Final Rule,

the Bureau finalized comment 100(a)–1 to include, as an example of evidence of compliance,

copies of documents provided by the debt collector to the consumer in accordance with FDCPA

section 809(a), as implemented by Bureau regulation.

401

Because the Bureau now is finalizing

§ 1006.34, the Bureau is making a technical change revising comment 100(a)–1 to include, as an

example of evidence of compliance, copies of documents provided by the debt collector to the

consumer in accordance with § 1006.34, as originally proposed. The Bureau addressed

comments received regarding proposed comment 100–1 in the section-by-section analysis of

§ 1006.100(a) and comment 100(a)–1 in the November 2020 Final Rule.

402

Section 1006.104 Relation to State Laws

FDCPA section 816 provides that the FDCPA does not annul, alter, or affect, or exempt

any person subject to the provisions of the FDCPA from complying with the laws of any State

400

84 FR 23274, 23367 (May 21, 2019).

401

85 FR 76734, 76907 (Nov. 30, 2020).

402

Id. at 76858 n.600.

264

with respect to debt collection practices, except to the extent that those laws are inconsistent with

any provision of the FDCPA, and then only to the extent of the inconsistency. FDCPA section

816 also provides that, for purposes of that section, a State law is not inconsistent with the

FDCPA if the protection such law affords any consumer is greater than the protection provided

by the FDCPA.

403

The November 2020 Final Rule finalized § 1006.104 to implement FDCPA

section 816.

404

Proposed comment 104–1 clarified that a disclosure required by applicable State law that

describes additional protections under State law does not contradict the requirements of the

FDCPA or the corresponding provisions of Regulation F.

405

In the November 2020 Final Rule,

the Bureau indicated that it was not finalizing proposed comment 104–1 as part of that rule and

would determine whether and how to finalize the comment as part of this final rule.

406

As discussed in the November 2020 Final Rule, some commenters asked the Bureau to

clarify how proposed comment 104–1 would interact with State law disclosure requirements.

407

According to these commenters, the proposed commentary did not track FDCPA section 816’s

statutory language and therefore would be susceptible to competing interpretations. These

commenters expressed concern that proposed comment 104–1 could be interpreted to mean that

§ 1006.104 would preempt State law disclosure requirements that afford the same protections as

the FDCPA and the corresponding provisions of Regulation F. These commenters opposed such

an interpretation as inconsistent with FDCPA section 816.

403

15 U.S.C. 1692n.

404

85 FR 76734 at 76860 (Nov. 30, 2020).

405

84 FR 23274, 23368 (May 21, 2019).

406

85 FR 76734, 76860 (Nov. 30, 2020).

407

Id.

265

With proposed comment 104–1, the Bureau did not intend to communicate that

§ 1006.104 would preempt disclosures required by State law that describe State laws that afford

the same protections as the FDCPA and the corresponding provisions of Regulation F. To

mitigate the risk that the proposed commentary could be interpreted in this manner, the Bureau is

modifying proposed comment 104–1 to more closely track FDCPA section 816’s statutory

language.

Accordingly, the Bureau is finalizing comment 104–1 to clarify that the FDCPA and the

corresponding provisions of Regulation F do not annul, alter, or affect, or exempt any person

subject to these requirements from complying with a disclosure requirement under applicable

State law that describes additional protections under State law that are not inconsistent with the

FDCPA and Regulation F. In addition, comment 104–1 clarifies that a disclosure required by

State law is not inconsistent with the FDCPA or Regulation F if the disclosure describes a

protection such law affords any consumer that is greater than the protection provided by the

FDCPA or Regulation F.

VI. Effective Date

As discussed in the November 2020 Final Rule, the Bureau proposed an implementation

period of one year after publication of the final rule in the Federal Register.

408

The Bureau

received several comments on the proposed effective date. As noted in the November 2020 Final

Rule, a few industry commenters supported the proposed effective date, stating that a one-year

implementation period would provide debt collectors with enough time to comply with the rule.

Two other industry commenters supported an 18-month and a 24-month implementation period,

respectively, arguing that it would take longer than one year to update policies and procedures,

408

85 FR 76734, 76863 (Nov. 30, 2020); see also 84 FR 23274, 23276 (May 21, 2019).

266

train employees, and make programming changes necessary to come into compliance. A

government commenter encouraged the Bureau to provide small entities more than one year to

comply, if such entities were not exempted from the rule altogether. Several industry

commenters asked the Bureau to clarify that a debt collector is permitted to comply with all or

part of the final rule before the effective date.

The Bureau considered those comments in finalizing the November 2020 Final Rule and

determined that that final rule would take effect one year after publication in the Federal

Final Rule would permit debt collectors to meet that effective date. The Bureau also recognized

that all stakeholders might benefit if the November 2020 Final Rule and this final rule had the

same effective date.

As noted in part III, the November 2020 Final Rule was published in the Federal Register

on November 30, 2020 and will take effect on November 30, 2021. The Bureau concludes that

all stakeholders will benefit if the November 2020 Final Rule and this final rule have the same

effective date. The Bureau also determines that setting the effective date for this final rule as

November 30, 2021, consistent with the effective date of the November 2020 Final Rule, will

provide debt collectors nearly one year, and therefore sufficient time, to come into compliance

with this final rule.

The Bureau notes that debt collectors may, but are not required to, comply with the final

rule’s requirements and prohibitions before the effective date. Until that date, the FDCPA and

other applicable law continue to govern the conduct of FDCPA debt collectors. Similarly, to the

extent the final rule establishes a safe harbor from liability for certain conduct or a presumption

267

that certain conduct complies with or violates the rule, those safe harbors and presumptions are

not effective until the final rule’s effective date.

VII. Dodd-Frank Act Section 1022(b) Analysis

A. Overview

In developing the final rule, the Bureau has considered the potential benefits, costs, and

impacts as required by section 1022(b)(2)(A) of the Dodd-Frank Act.

409

Debt collectors play a critical role in markets for consumer financial products and

services. Credit markets function because lenders expect that borrowers will pay them back. In

consumer credit markets, if borrowers fail to repay what they owe per the terms of their loan

agreement, creditors often engage debt collectors to attempt to recover amounts owed, whether

through the court system or through less formal demands for repayment.

In general, third-party debt collection creates the potential for market failures.

Consumers do not choose their debt collectors, and, as a result, debt collectors do not have the

same incentives that creditors have to treat consumers fairly.

410

Certain provisions of the

409

Specifica lly, section 1022(b)(2)(A) of the Dodd-Frank Act (12 U.S.C. 5512(b)(2)(A)) requires the Bureau to

consider the potential benefits and costs of the regulation to consumers and covered persons, including the potential

reduction of access by consumers to consumer financial products and services; the impact of the rule on insured

depository institutions and insured credit unions with less than $10 billion in total assets as described in section 1026

of the Dodd-Frank Act (12 U.S.C. 5516); and the impact on consumers in rural areas.

410

Consumers do choose their lenders, and, in principle, consumer loan contracts could specify which debt collector

would be used or what debt collection practices would be in the event a loan is not repaid. Some economists have

identified potential m arket failures that prevent loan contracts from including such terms even when they could

make both borrowers and lenders better off. For example, terms related to debt collection may not be salient to

consumers at the time a loan is made. Alternatively, if such terms are salient, a contract that provides for m ore

lenient collection practices may lead to adverse selection, attracting a disproportionate share of borrowers who know

they are more likely to default. See Thomas A. Durkin et al., Consumer Credit and the American Economy 521-25

(Oxford U. Press 2014) (discussing potential sources of market failure and potential problems with some of those

a rguments). See also Erik Durbin & Charles Romeo, The Economics of Debt Collection: with attention to the issue

of salience of collections at the time credit is granted, Journal of Credit Risk (Sept. 4, 2020) (discussing how rules

that limit debt collection affect consumer welfare when debt collection is not salient to consumers when they

borrow).

268

FDCPA may help mitigate such market failures in debt collection, for example by prohibiting

unfair, deceptive, or abusive debt collection practices by third-party debt collectors.

Any restriction on debt collection may reduce repayment of debts, providing a benefit to

some consumers who owe debts and an offsetting cost to creditors and debt collectors. A

decrease in repayment will in turn lower the expected return to lending. This can lead lenders to

increase interest rates and other borrowing costs and to restrict availability of credit, particularly

to higher-risk borrowers.

411

Because of this, policies that increase protections for consumers

with debts in collection involve a tradeoff between the benefits of protections for those

consumers and the possibility of increased costs of credit and reduced availability of credit for all

consumers. Whether there is a net benefit from such protections depends on whether consumers

value the protections enough to outweigh any associated increase in the cost of credit or

reduction in availability of credit.

The final rule will further the FDCPA’s goals of eliminating abusive debt collection

practices and ensuring that debt collectors who refrain from such practices are not competitively

disadvantaged.

412

However, as discussed below, it is not clear based on the information

available to the Bureau whether the net effect of the final rule will be to make it more costly or

less costly for debt collectors to recover unpaid amounts, and therefore not clear whether the rule

will tend to increase or decrease the supply of credit. The final rule will benefit both consumers

411

See Thomas A. Durkin et al., Consumer Credit and the American Economy 521-25 (Oxford U. Press 2014)

(discussing theory and evidence on how restrictions on creditor remedies affect the supply of credit). Empirical

evidence on the impact of State laws restricting debt collection is discussed in section G below. The provisions in

this fina l rule could also affect consumer demand for credit, to the extent that consumers contemplate collection

practices when making borrowing decisions. However, there is evidence suggesting that consumer demand for

credit is generally not responsive to differences in creditor remedies. See James Barth et al., Benefits and Costs of

Legal Restrictions on Personal Loan Markets, Journal of Law & Economics, 29(2) (1986).

411

See 15 U.S.C. 1692(e).

412

See id.

269

and debt collectors by increasing clarity and certainty about what the FDCPA prohibits and

requires. When a law is unclear, it is more likely that parties will disagree about what the law

requires, that legal disputes will arise, and that litigation will be required to resolve disputes.

Since 2010, consumers have filed approximately 8,000 to 12,000 lawsuits under the FDCPA

each year, some of which involve issues on which the law is unclear.

413

The number of disputes

settled without litigation has likely been much greater.

414

Perhaps more important than the costs

of resolving legal disputes are the steps that debt collectors take to prevent legal disputes from

arising in the first place. This includes direct costs of legal compliance, such as auditing and

legal advice, as well as indirect costs from avoiding collection practices that might be both

effective and legal but that raise potential legal risks. In some cases, debt collectors seeking to

follow the law and avoid litigation have adopted practices that appear to be economically

inefficient, with costs that exceed the benefits to consumers or even impose net costs on

consumers.

415

This final rule relating to disclosures could make debt collection either more or less

costly in ways that are difficult to predict. For example, the validation notice requirements will

provide consumers with more information than they currently receive about debts, which could

reduce costs to consumers and debt collectors from disputes that arise when consumers do not

recognize the debt or do not understand the basis for the alleged amount due. At the same time,

413

See WebRecon LLC, WebRecon Stats for Dec 2019 & Year in Review, https://webrecon.com/webrecon-stats-for-

dec-2019-and-year-in-review-how-did-your-favorite-statutes-fare/ (la st visited Dec. 1, 2020). Greater clarity about

legal requirements could reduce unintentional violations and could also reduce lawsuits because, when parties can

better predict the outcome of a lawsuit, they may be more likely to settle claims out of court.

414

Some debt collectors have reported that they receive approximately 10 demand letters from a ttorneys a sserting a

violation of the FDCPA f or ea ch la wsuit filed. See Small Business Review Panel Outline, supra note 39, a t 69

n.105.

415

For exa mple, as discussed further below, debt collectors typically may disclose only the information that FDCPA

section 809(a) specifically references and may provide the FDCPA section 809 information using statutory

la nguage, ra ther than pla in la nguage that consumers can more easily comprehend.

270

the final rule’s clearer explanation of dispute rights could make consumers more likely to

dispute, which could provide benefits to consumers while increasing costs for debt collectors.

Disputes are costly for debt collectors to process, so these requirements could either increase or

decrease debt collector and consumer costs depending on the net effect on dispute rates.

In developing the final rule, the Bureau has consulted, or offered to consult with, the

appropriate prudential regulators and other Federal agencies, including regarding consistency

with any prudential, market, or systemic objectives administered by such agencies.

B. Provisions to Be Analyzed

The analysis below considers the potential benefits, costs, and impacts to consumers and

covered persons of key provisions of the final rule (provisions), which include:

1. Time-barred debt: prohibiting suits and threats of suit.

2. Notice for validation of debts.

3. Required actions prior to furnishing information.

C. Data Limitations and Quantification of Benefits, Costs, and Impacts

The discussion in this part VII relies on publicly available information as well as

information the Bureau has obtained. To better understand consumer experiences with debt

collection, the Bureau developed its 2015 Survey of Consumer Views on Debt, which provided

the first comprehensive and nationally representative data on consumers’ experiences and

preferences related to debt collection.

416

In addition, the Bureau relies on its Consumer Credit

Panel (CCP) to understand potential benefits and costs to consumers of the rule.

417

To better

416

See CFPB Debt Collection Consumer Survey, supra note 292.

417

For more information about Bureau data sources, see Bureau of Consumer Fin. Prot., Sources and uses of data at

the Bureau of Consumer Financial Protection (Sept. 26, 2018), https://www.consumerfinance.gov/data-

research/research-reports/sources-and-uses-data-bureau-consumer-financial-protection/.

271

understand potential effects of the rule on industry, the Bureau has engaged in significant

outreach to industry, including through the CFPB Debt Collection Operations Study.

418

In July

2016, the Bureau consulted with small entities as part of the SBREFA process and obtained

important information on the potential impacts of proposals that the Bureau was considering at

the time for the topics covered by the final rule; many of those proposals are included in the final

rule.

419

The sources described above, together with other sources of information and the Bureau’s

market knowledge, form the basis for the Bureau’s consideration of the likely impacts of the

final rule. The Bureau makes every attempt to provide reasonable estimates of the potential

benefits and costs to consumers and covered persons of this final rule given available data.

However, available data sources generally do not permit the Bureau to quantify, in dollar terms,

how particular provisions will affect consumers. With respect to industry impacts, much of the

Bureau’s existing data come from qualitative input from debt collectors and other entities that

operate in the debt collection market rather than from representative sampling that would allow

the Bureau to estimate total benefits and costs.

General economic principles and the Bureau’s expertise in consumer financial markets,

together with the data and findings that are available, provide insight into the potential benefits,

costs, and impacts of the final rule. Where possible, the Bureau has made quantitative estimates

based on these principles and the data available. Some benefits and costs, however, are not

amenable to quantification, or are not quantifiable given the data available to the Bureau. The

Bureau provides a qualitative discussion of those benefits, costs, and impacts. The Bureau

418

See CFPB Debt Collection Operations Study, supra note 37.

419

See Sma ll Business Review Panel Report, supra note 40.

272

requested additional data or studies that could help quantify the benefits and costs to consumers

and covered persons of the May 2019 Proposed Rule and the February 2020 Proposed Rule. The

Bureau summarizes comments on this subject below, but few comments explicitly addressed

quantifying the costs and benefits of the rule or provided additional data or studies. Comments

on the benefits and costs of the rule are also discussed in part V above.

D. Baseline for Analysis

In evaluating the potential benefits, costs, and impacts of the final rule, the Bureau takes

as a baseline the current legal framework governing debt collection. This includes debt collector

practices as they currently exist, responding to the requirements of the FDCPA as currently

interpreted by courts and law enforcement agencies, other Federal laws, and the rules and

statutory requirements promulgated by the States.

420

In the consideration of potential benefits,

costs, and impacts below, the Bureau discusses its understanding of practices in the debt

collection market under this baseline and how those practices are likely to change under the final

rule.

Until the creation of the Bureau, no Federal agency was given the authority to write

substantive regulations implementing the FDCPA, meaning that many of the FDCPA’s

requirements are subject to interpretations in court decisions that are not always consistent or do

not always definitely resolve an issue, such as a single district court opinion on an issue. Debt

collectors’ practices reflect their interpretations of the FDCPA and their decisions about how to

balance effective collection practices against litigation risk. Many of the impacts of the final rule

relative to the baseline would arise from changes that debt collectors would make in response to

420

These requirements, and the specificity of the requirements, may vary depending upon the jurisdiction in which

the collection occurs. This baseline does not include any potential impacts of the November 2020 Final Rule,

however. The November 2020 Final Rule included a separate Dodd-Frank Act Section 1022(b) a nalysis, a nd that

rule’s provisions do not go into effect until November 30, 2021.

273

additional clarity about the most appropriate interpretation of what conduct is permissible and

not permissible under the FDCPA’s provisions.

The Bureau received no comments regarding its choice of baseline for its section 1022(b)

analysis.

E. Goals of the Rule

The final rule is intended to further the FDCPA’s goals of eliminating abusive debt

collection practices and ensuring that debt collectors who refrain from such practices are not

competitively disadvantaged. To these ends, an important goal of the rule is to benefit both

consumers and debt collectors by increasing clarity and certainty about what the FDCPA

prohibits and requires, which could improve compliance with the FDCPA while reducing

unnecessary litigation regarding the FDCPA’s requirements.

As discussed in part V and in this part VII, other goals of the rule’s provisions regarding

validation information include providing more information to consumers about their debts, which

may help consumers determine whether a debt is theirs and whether the reported amount owed is

accurate and may reduce unnecessary disputes. The validation information is also intended to

help consumers to know their rights and be able to exercise them, including by disputing a debt.

In addition, the model validation notice is intended to provide information to consumers in a

more appealing and easy-to-read format, making it more likely that consumers read and

comprehend the information than with the validation notices currently in use.

The rule’s provision requiring debt collectors to take certain actions prior to furnishing

information about a debt to a consumer reporting agency is intended to increase the likelihood

that consumers learn about an alleged debt before furnishing occurs, giving them an opportunity

to resolve the debt or dispute it if appropriate.

274

The rule’s provision prohibiting debt collectors from suing or threatening to sue on time-

barred debts is intended to mitigate the consumer harms that can result from such actions,

including causing some consumers to pay or prioritize time-barred debts over other debts in the

mistaken belief that doing so is necessary to avoid litigation or adverse judgments, when in fact

consumers have meritorious defenses based on the statute of limitations.

F. Coverage of the Rule

The final rule applies to debt collectors as defined in the FDCPA and § 1006.2(i) of the

November 2020 Final Rule. Creditors that collect on debts they own generally will not be

affected directly by the final rule because they typically are not debt collectors for purposes of

the FDCPA. Creditors, however, may experience indirect effects if debt collectors’ costs

increase and if those costs are passed on to creditors.

G. Potential Benefits and Costs to Consumers and Covered Persons

The Bureau discusses the benefits and costs of the rule to consumers and covered persons

(generally FDCPA debt collectors) in detail below.

421

The Bureau believes that an important

benefit of many of the provisions to both consumers and covered persons—compared to the

baseline of the FDCPA as currently interpreted by courts and law enforcement agencies—is an

increase in clarity and precision of the law governing debt collection. Greater certainty about

legal requirements can benefit both consumers and debt collectors, making it easier for

consumers to understand and assert their rights and easier for firms to ensure they are in

compliance. The Bureau discusses these benefits in more detail with respect to certain

421

For purposes of the section 1022(b)(2) analysis, the Bureau considers any consequences that consumers perceive

as harmful to be a cost to consumers. In considering whether consumers might perceive certain activities as

harmful, the Bureau is not analyzing whether those activities would be unlawful under the FDCPA or the Dodd-

Frank Act.

275

provisions below but believes that they generally apply, in varying degrees, to all of the

provisions discussed below.

1. Time-barred debt: prohibiting suits and threats of suit

Section 1006.26(b) prohibits a debt collector from suing or threatening to sue a consumer

to collect a time-barred debt.

As discussed in part V above, multiple courts have held that the FDCPA prohibits suits

and threats of suit on time-barred debt. The Bureau understands that most debt collectors do not

knowingly sue or threaten to sue consumers to collect time-barred debts. Although the final rule

applies a strict liability standard to this prohibition, under which debt collectors may be liable for

suits or threats of suit even if they do not know that the debt is time-barred, the Bureau believes

that debt collectors have multiple ways of managing such risk including, but not limited to,

confirming that the statute of limitations has not expired before bringing or threatening to bring a

legal action or, if a debt collector is unable to make such a determination, refraining from

bringing or threatening to bring a legal action while, in most States, continuing with non-

litigation collection activities. Therefore, the Bureau does not expect this provision of the rule to

have a significant effect on most debt collectors.

To the extent that there are costs to covered persons or benefits to consumers from this

provision, they will most likely come from reduced payments on time-barred debts, to the extent

that some debt collectors currently sue or threaten to sue on time-barred debts as a strategy to

elicit payment.

422

If it is currently true that (1) suing or threatening to sue on debts is an

422

The fina l rule m a y also increase costs to covered persons to the extent that debt collectors who currently sue or

threaten to sue to collect time-barred debt increase their efforts to determine whether or not a debt is time barred. As

discussed above in pa rt V, The Bureau recognizes that, in most jurisdictions, expira tion of the statute of lim ita tions

provides the consumer with an affirmative defense to liability, but it does not bar a debt collector from bringing suit.

As such, some debt collectors who sue or threaten to sue on older debts may currently expend less tim e a nd effort

verifying the time-barred status of a debt than they will under the final rule.

276

important means of collection for debts for which the statute of limitations is close to expiring,

and (2) most debt collectors stop suing or threatening to sue once the statute of limitations for a

debt expires, then one would expect repayment rates to drop after the statute of limitations

expires, and that drop might be made more significant by the provision. Such a reduction in

payments would benefit consumers who owe the debts while imposing costs on debt collectors

and creditors and potentially increasing the cost of credit generally.

The Bureau therefore attempted to indirectly measure the potential effect of the provision

by examining the behavior of consumers who owe debts that either recently expired or are close

to expiring under their State’s statute of limitations. To do so, the Bureau used data from its

Consumer Credit Panel (CCP), which contains information from one of the three nationwide

CRAs. The Bureau used data from the CCP to attempt to estimate the current effect of State

statutes of limitation on the propensity of consumers to pay old debts in collection.

The CCP contains information on collections tradelines—records that were furnished to

this nationwide CRA by third-party debt collectors or debt buyers. The Bureau analyzed these

data to determine whether the probability of payment declines around the expiration of the

statute of limitations in the consumer’s State. Specifically, the Bureau followed debts reported in

the CCP from the time they were first reported on a consumer’s credit record until they either

showed some record of payment or disappeared from the credit record. In this analysis, the

Bureau assumed that the applicable statute of limitations is the one applicable to written

contracts in the consumer’s State of residence and that the statute of limitations begins for a debt

on the date that the debt first appears on the consumer’s credit report. The Bureau assumed this

starting date because there was no other date in the available data on which to reasonably base

the beginning of the statute of limitations. There is likely to be some inaccuracy in this

277

assumption due to a variety of factors, including delays between the beginning of the period

defined by the statute of limitations and the first report of information to the CRA and cases in

which the applicable statute of limitations is not the one in the consumer’s State. However, if the

estimated expiration of the statute of limitations is at least approximately correct in most cases,

then one would expect to observe whether the expiration of the statute of limitations has an effect

on the likelihood that a debt is reported to have been paid.

The Bureau calculated the probability of payment occurring after a given number of days,

conditional on no payment occurring before—in technical terms, the “hazard rate” for

payments—for all collections tradelines in the CCP. The Bureau then calculated the average

hazard rate based on the number of months before or after the estimated expiration of the

applicable statute of limitations. This calculation is plotted in Figure 1, below. The figure shows

that the probability of a collections tradeline showing evidence of payment declines steadily for

at least a year leading up to the estimated expiration of the statute of limitations and continues to

decline at roughly the same rate afterwards. Thus, while the probability of payment declines

over time, the reduced ability of debt collectors to pursue litigation does not seem to materially

affect payments on collections tradelines. Combined with the Bureau’s understanding that debt

collectors generally do not knowingly sue or threaten to sue on time-barred debt, this suggests

that the provision would be unlikely to cause any further reduction in the rate of repayment on

time-barred debt.

278

Figure 1: Probability of Payment

Because the available data do not permit the Bureau to identify the expiration of the

statute of limitations precisely, the analysis above may fail to identify some effects.

2. Notice for validation of debts

Section 1006.34 implements and interprets FDCPA section 809(a), (b), (d), and (e).

Specifically, § 1006.34(a) provides that, subject to certain exceptions, a debt collector must

provide a consumer the validation information described in § 1006.34(c). Section 1006.34(c)

implements FDCPA section 809(a)’s content requirements and specifies that validation

information includes certain information about the debt and the consumer’s protections with

respect to debt collection that debt collectors do not currently provide to consumers. Section

1006.34(d) sets forth a general requirement that such information be clear and conspicuous.

Section 1006.34(d) also provides safe harbors for using the model validation notice, specified

279

variations of the model notice, or a substantially similar form, and permits the inclusion of

certain optional information. Section 1006.34(e) affirmatively permits debt collectors to provide

validation notices translated into other languages and requires debt collectors who offer to

provide consumers translated notices to provide them to consumers who request them.

Potential benefits and costs to consumers. The required validation information may

benefit consumers in four ways. First, the disclosures will provide more information about the

debt, which may help consumers determine whether the debt is theirs and whether the reported

amount owed is accurate. Second, the notice will provide a plain-language disclosure of the

consumer’s rights in debt collection, in particular the right to dispute, which should help

consumers to know their rights and be able to exercise them. Third, the validation information

will include consumer-response information that should make it easier for consumers to take

certain actions, including disputing a debt. Finally, the model validation notice form is intended

to provide information to consumers in a more plain-language and visually appealing format,

making it more likely that consumers will read and comprehend the information than with the

validation notices currently in use.

To quantify the benefit of providing more and clearer validation information, the Bureau

would need to estimate the impact of this additional information on consumers’ ability to

recognize their debts compared to what is currently provided on validation notices, as well as

how consumers would respond to that additional information. Although the Bureau is not aware

of data that would permit a full accounting of these benefits, below is a summary of information

the Bureau is aware of that is relevant to assessing these benefits.

The Bureau understands that, in general, validation notices currently include little or no

information about the debt beyond the information specifically listed in section 809(a) of the

280

FDCPA (e.g., the current amount of the debt and the name of the current creditor). This

information may not be sufficient for the consumer to recognize the debt, particularly if: (1) the

amount owed has changed over time due to interest, fees, payments, or credits; (2) the debt

collector has changed since an original collection attempt; or (3) the creditor’s name is not one

the consumer associates with the debt (as with some store-branded credit cards issued by third-

party financial institutions). Consumers who do not recognize a debt because the information on

a validation notice is insufficient may incur costs if they mistakenly dispute a debt they owe,

make a payment on a debt they do not owe, or ignore a debt on the assumption that the collection

attempt is in error.

Relative to current validation notices, the validation information under the final rule will

include more specific details about the debt, such as the debt’s account number and an

itemization of the debt. The Bureau has determined that this information will benefit consumers

by making it easier for them to determine whether they owe a debt and, therefore, reducing the

likelihood of incurring costs due to mistakes like those noted above. The consumer can also use

the consumer-response information to request the name and address of the original creditor,

which may further help the consumer to recognize the debt.

To fully evaluate the benefits to consumers of disclosing this additional information, the

Bureau would need representative data to estimate how often consumers would read and

understand the additional information on the notice and the extent to which that information

increases consumer recognition and understanding compared to a notice without it. For example,

the Bureau could further quantify some of the consumer benefits of the additional information if

the Bureau were able to estimate: (1) how many consumers ignore notices out of a mistaken

conclusion that the debt is not theirs; (2) how many consumers dispute correct debts, and

281

subsequently, how much time the validation notice saves by obviating later interactions that

result from improper disputes; and (3) how many consumers fail to dispute or make payments on

incorrect debts. The Bureau is not aware of a source of information on the number of consumers

in these categories or the possible time savings that could result from the validation information.

The Bureau’s Debt Collection Consumer Survey suggests that the required validation

information would likely be helpful in recognizing a debt. Specifically, when asked how helpful

various pieces of information would be in figuring out whether they owed a debt, consumers

were most likely to indicate that the creditor name, type of debt, and an itemization of the

amount owed (such as principal, interest, and fees) were especially valuable.

423

These opinions

were echoed in focus groups in which consumers noted that, after a debt is sold, it is more

difficult to recognize, and that they wanted as much information as possible to help them

recognize the debt as theirs (especially the account number, creditor, and amount due) with the

exception of sensitive information like social security numbers.

424

To quantify the benefits of the provision requiring a clear and conspicuous disclosure of a

consumer’s right to dispute a debt, the Bureau would need to estimate the number of consumers

who fail to dispute debts that they do not owe because they are unaware of, or do not

comprehend, their right to dispute. The Bureau cannot precisely quantify this benefit; however,

the discussion below identifies several applicable considerations and estimates.

The Bureau estimates that at least 49 million consumers are contacted by debt collectors

each year.

425

Twenty-eight percent of consumers who said they had been contacted about one or

more debts in collection reported that the contacts included attempts to collect at least one debt

423

CFPB Debt Collection Consumer Survey, supra note 292.

424

FMG Focus Group Report, supra note 26, at 15-16.

425

See CFPB Debt Collection Consumer Survey, supra note 292, at 13, 40-41.

282

that the consumers believed they did not owe.

426

One-third of consumers who had been

contacted said the amount the creditor or debt collector was trying to collect was wrong for at

least one of these debts, and 16 percent said the contacts included at least one contact about a

debt that was instead owed by a family member. (Some consumers reported more than one of

these issues). Taken together, more than half of consumers (53 percent) who said they had been

contacted about one or more debts in collection reported that they thought at least one of the

debts they were contacted about was in error. This suggests that there are many consumers who

receive the validation notices in use today who might be likely to dispute based on their

perception that either the debt is not theirs or is wrong.

Among the 53 percent of consumers who cited one of the issues noted above, 42 percent

reported that they disputed a collection in the prior year, and 11 percent of consumers who had

not cited one of those issues indicated that they had disputed a debt. The fact that less than half

of consumers who questioned a debt about which the creditor or debt collector contacted them

reported disputing a debt

is consistent with the possibility that some consumers do not dispute in

response to a collection effort because they are not aware of the option to dispute or do not

understand the steps required to do so. The required clear-and-conspicuous statement of the

dispute right could benefit these consumers by making them aware of their right to dispute and

informing them how to dispute.

The survey’s finding that only 42 percent of consumers who thought they experienced an

error with a debt in collection disputed the error suggests consumers are uncertain about how to

426

The survey questions concerning consumer beliefs about errors in collections did not ask respondents to

distinguish between debts owed to a debt collector and debts owed to a creditor. If consumers a re more or less

likely to believe there is an error for collection attempts by debt collectors, then this percentage and those below

may over- or under-estimate the likelihood that a consumer believes a debt is in error when the consumer is

contacted by a debt collector.

283

dispute a debt in collection or that they believe that disputes require too much time and effort

relative to the expected benefit. The required consumer-response information could reduce these

impediments to disputing debts that consumers believe are in error. Specifically, the consumer-

response information will provide a clear means of disputing a debt in a way that triggers the

protections provided by the FDCPA and this rule. Furthermore, the convenience of the

consumer-response information, which is formatted on the model validation notice as a tear-off

with prompts for various actions, could reduce barriers to responding by eliminating or reducing

the burden of, for example, deciding what information is relevant and how to phrase the

response.

427

This could allow some consumers to save time and avoid other negative

consequences, such as lower credit scores due to a debt they may not owe being listed as unpaid

on their credit reports.

Additionally, the consumer-response information includes an option to request

information about the original creditor. Original-creditor information may help consumers in

determining whether the debt is theirs.

The Bureau has tested a model validation notice. Several considerations went into the

content and design of the model validation notice. First, consumers must have relevant and

accurate information to make informed decisions about how to act with regard to the debt. The

Bureau therefore conducted consumer testing to identify what pieces of information consumers

considered to be important to help them identify whether a debt was theirs, whether the amount

stated was correct, and how the amount the debt collector was attempting to collect has changed

427

A 2016 research report by the United Kingdom’s Financial Conduct Authority showed that, in a large

randomized control trial, a tear-off form (with a text or email reminder) led to more consumers switching from a

current sa vings a ccount to one with a better interest rate relative to getting only a n inf ormational text or email

reminder and relative to an informational box with instructions on how to switch. Paul Adams et al., Attention,

Search and Switching: Evidence on Mandated Disclosure from the Savings Market (UK Fin. Conduct Authority,

Occasional Paper No. 19 2016), https://www.fca.org.uk/publication/occasional-papers/occasional-paper-19.pdf.

284

over time (e.g., due to fees, interest, and payments).

428

However, there is some indication that

consumers tend to not read certain types of standard-form disclosures.

429

To try to avoid this

result, the Bureau conducted consumer testing exploring how consumers interacted and engaged

with the notice and the pieces of information contained therein.

430

This helped the Bureau

understand whether consumers were inclined to engage with the document in general and which

pieces of the validation notice received more or less consumer attention.

The Bureau incorporated the findings from this consumer testing in its design of the

model validation notice. To increase both consumer engagement with and comprehension of the

validation information, the Bureau designed the model notice to be visually engaging. The

notice uses plain language wherever possible and conforms to recommendations the Securities

and Exchange Commission (SEC) set forth in its plain English handbook.

431

To reduce the

perceived complexity of the information, the form uses a clear hierarchy of information through

positioning in a columnar format, varying type size, and bold-faced type for subsection headings.

It uses shading to highlight the amount due and plain language rather than technical terms.

Usability testing analyzing eye-tracking suggests that participants were able to locate relevant

information on the form, with most participants able to quickly locate their account number and

the contact information of the creditor.

432

The information presented in the form is also concise,

428

FMG Sum mary Report, supra note 29.

429

See, e.g., Ian Ayres & Alan Schwartz, The No-Reading Problem in Consumer Contract Law, 66 Stan. L. Rev.

545 (2014); Yannis Bakos et al., Does Anyone Read the Fine Print? Consumer Attention to Standard-Form

Contracts, 43 J. Legal Studies 1, 1-35 (2014); George R. Milne & Mary J. Culnan, Strategies for Reducing Online

Privacy Risks: Why Consumers Read (or Don’t Read) Online Privacy Notices, 18 J. Interactive Mktg. 3, 15-29

(2004); Jonathan A. Oba r & Anne Oeldorf-Hirsch, The Biggest Lie on the Internet: Ignoring the Privacy Policies

and Terms of Service Policies of Social Networking Services (York U., draft version, 2018),

http://dx.doi.org/10.2139/ssrn.2757465.

430

FMG Cognitive Report, supra note 27.

431

See Sec. & Exchange Comm’n, A Plain English Handbook (Aug. 1998), https://www.sec.gov/pdf/handbook.pdf.

432

FMG Sum mary Report, supra note 29.

285

presenting consumers with a manageable amount of information about the debt and what they

can do in response to the information. This is important, as the perceived and actual cost to a

consumer of reading a disclosure increases with the amount of information provided.

433

A number of consumer advocate and academic commenters asserted that the proposed

model notice was not adequately tested. Some of these commenters stated that the Bureau’s

testing included too few participants to generate valid conclusions about the proposed model

notice’s efficacy or to evaluate the comprehension of consumers, particularly of the least

sophisticated consumers. For instance, a consumer advocate expressed concern that only 60

consumers were included in the cognitive and usability testing rounds.

434

Likewise, an academic

commenter stated that the Bureau’s consumer testing focused too heavily on observing what

testing participants looked at on the model notice (based on the use of eye tracking techniques) at

the expense of testing participants’ comprehension of the notice. Another commenter stated that

the Bureau should have tested more diverse groups, including consumers with limited English

proficiency, students, older consumers, and consumers from more diverse socioeconomic

backgrounds. Some consumer advocate and academic commenters recommended that the

Bureau field test the proposed model notice with consumers with real debts. A consumer

advocate expressed concern about the performance of certain aspects of the proposed model

433

The idea that consumers may decrease their engagement with information when more information is provided is

somewhat supported by research on “choice overload.” This work indicates that, if choice sets are large, some

people opt to make no choice at all. See, e.g., Sheena Iyengar et al., How Much Choice is Too Much? Contributions

to 401(k) Retirement Plans, in Pension Design and Structure: New Lessons from Behavioral Finance, at 83 (Oxford

U. Press 2004).

434

See FMG Summary Report, supra note 29, at 5-7.

286

notice in quantitative testing, noting in particular that approximately 40 percent of respondents

who received the model notice failed to identify the correct entity the consumer should pay.

435

The Bureau disagrees that the model validation notice was not adequately tested. The

model validation notice was developed and validated over multiple rounds of testing between

2014 and 2020, and the Bureau determines that these multiple rounds of testing were sufficient to

assess the model validation notice’s efficacy and comprehensibility. Further, the Bureau

disagrees that its testing focused on eye-tracking at the expense of comprehension testing as

consumer comprehension of the model validation notice was assessed in three rounds of testing.

The Bureau’s testing used eye-tracking in conjunction with consumer responses to inform its

conclusions.

The Bureau disagrees that it did not sample sufficiently diverse groups. The Bureau

selected respondents with the goal of developing diverse testing pools that would serve as a

proxy for the population at large. For example, in one round of usability testing, participants

reflected a range of demographic characteristics broken down by race and ethnicity, household

income, education level, and employment status.

436

With respect to the criticism that the Bureau

did not “field test” the model validation notice, testing the form with consumers with real debts

would have been impractical.

Regarding comments that the model validation notice did not perform well during the

quantitative testing round, the Bureau disagrees. As noted above, in that testing round, the

model validation notice consistently performed better than or equal to the status quo notice,

435

Several comments in response to the May 2019 proposal also criticized the consumer testing as being outdated

because, when that proposal was published, the most recent testing had occurred in 2016. However, the Bureau

does not find any reason to believe that consumer understanding of the model notice has changed since 2016, and

the commenters did not provide any evidence to support such a claim. Mo reover, since the May 2019 proposal, the

Burea u has conducted two a dditional testing rounds.

436

FMG Usa bility Report, supra note 28, at 85-87.

287

including on the question of to whom the consumer should send a payment.

437

Additionally, the

Bureau conducted qualitative follow-up testing of the model notice in October 2020. In this

testing 88 percent of respondents reported that the notice was either “very easy” or “easy” to

understand.

438

Between 71 percent and 100 percent of participants responded correctly to

14 different comprehension questions. Although some participants expressed confusion about a

few aspects of the notice, the initial reactions to the notice were that information was clear and

the available actions were obvious.

In summary, the Bureau’s testing establishes that consumers will benefit from the use of

the model notice compared to the baseline of status quo validation notices.

The Bureau expects consumers to experience few costs as a result of the provision.

Potential benefits to covered persons. The provision provides debt collectors with a safe

harbor if they use the model validation notice, specified variations of the model notice, or a

substantially similar form to meet the requirements in § 1006.34(c). The Bureau understands

that debt collectors currently face litigation risk associated with the validation notices they send,

reflecting, in part, conflicting court decisions about what language is required and what language

is permitted in the notices.

439

The Bureau expects a significant number of debt collectors will

use the model notice, specified variations of the model notice, or a substantially similar form

and, therefore, will face significantly reduced litigation risk when providing validation notices

because they will receive the safe harbor. This will benefit debt collectors directly, by reducing

437

In response to the question “According to the notice, if Person A wanted to make a payment on the debt, who

should he or she sent the payment to?” approximately 60 percent of consumers who received the model validation

notice answered correctly compared to approximately 40 percent of consumers who received a status quo notice.

CFPB Qua ntitative Testing Report, supra note 31, a t 14.

438

See id. at 16.

439

See Sma ll Business Review Panel Report, supra note 40, at 22.

288

litigation costs related to validation notices. The provision’s requirements to provide specific

information about the debt and about a consumer’s protections in debt collection could also

indirectly benefit debt collectors by adding information to validation notices that would be

helpful to consumers but that debt collectors currently do not include for fear that it would

increase litigation risk. The validation information may also make consumers more likely to

dispute, which could increase costs for debt collectors, as discussed under “Potential costs to

covered persons” below.

The validation information includes specific information about the debt intended to help

consumers identify the debt and understand the amount the debt collector claims is owed. The

Bureau’s qualitative consumer research and the Bureau’s complaint data suggest that the

information currently included in validation notices is often not sufficient for consumers to

identify a debt or whether the amount owed is correct. If consumers are better able to identify

debts, they may be less likely to dispute or ignore a debt that they in fact owe, and at the same

time may be better able to articulate the basis for a dispute of a debt that they do not owe. These

effects could benefit debt collectors by reducing the costs associated with consumer disputes.

Although it is possible that debt collectors could currently provide such information on

validation notices, the Bureau understands that some debt collectors who would like to provide

additional information do not do so largely due to the legal risks associated with including

information in the validation notice beyond what is expressly required by the FDCPA.

440

The

form will significantly reduce this legal risk. To quantify the benefits of this provision to

covered persons, the Bureau would need data on how frequently consumers do not recognize the

440

See Sma ll Business Review Panel Report, supra note 40, at 22 (finding that small entities would benefit from a

model notice that reduced litiga tion risk a rising from conflicting court decisions a bout what information is perm itted

on a validation notice).

289

debt or the amount owed as identified on a validation notice, how many consumers would better

recognize the debt if they received the required validation information, and how consumers

would act in response to that information. While the Bureau is not aware of available data that

would permit it to estimate these numbers, the Debt Collection Consumer Survey does provide

some basis for concluding that the required validation information will be helpful to consumers

and, therefore, beneficial for debt collectors.

The validation information could reduce debt collector costs associated with disputes by

preventing some disputes from consumers who are more likely to recognize that they owe a debt

and by making the disputes that debt collectors receive clearer and easier to resolve.

Debt collectors report that processing disputes is a costly activity and that it can be

especially difficult to process disputes if the consumer provides little or no detail about the basis

for a dispute. Debt collectors surveyed by the Bureau indicated that most disputes took between

five minutes and one hour of staff time to resolve, with 15 to 30 minutes being the most common

amount of time.

441

Respondents said that disputes took the longest amount of time to resolve if

the basis of the dispute was unclear or if the consumer said the debt was not theirs.

442

One commenter noted that 40 percent of disputes at their debt collection agency are non-

generic and generally resolvable. This commenter asserted that the tear offs on the model

validation notice will make these non-generic disputes less informative. An industry commenter

noted that 99.4 percent of accounts it received were not disputed. Of the 0.6 percent that are

disputed, 80 percent are accurate once more information is gathered. Given this, the commenter

441

CFPB Debt Collection Operations Study, supra note 37, at 31.

442

Id.

290

argued that providing consumers itemized statements for medical bills, which can run into many

pages, is unnecessary.

The Bureau does not have a basis to estimate how much the validation information might

affect dispute rates. As an illustration of potential cost savings if dispute rates fall, if the

information were to reduce the number of consumers who dispute by 1 percent of all validation

notices sent, and assuming that there are 140 million validation notices sent per year,

443

the

overall number of annual disputes would fall by 1.4 million. Assuming time to process each

dispute of 0.375 hours, the overall savings to industry would be estimated at 525,000 person-

hours, or approximately 250 full-time equivalents. Assuming labor costs for debt collectors of

$22 per hour,

444

this would represent industry cost savings of about $11.5 million.

The validation notice could also reduce the cost of processing disputes by making it

easier for consumers who dispute to provide at least some information about the basis of their

disputes. This could reduce the costs to covered persons of processing disputes by making it

easier for debt collectors to investigate disputed debts in order to verify the debt.

Potential costs to covered persons. Debt collectors already send validation notices to

consumers to comply with the FDCPA, so the validation information will generally affect the

content of existing disclosures debt collectors are sending rather than require debt collectors to

send entirely new disclosures. Nonetheless, debt collectors will incur certain costs to comply

with the form. These include one-time compliance costs, the ongoing costs of obtaining the

443

The assumption of 140 million validation notices per year is based on an estimated 49 million consumers

contacted by debt collectors each year and an assumption that each consumer receives an average of approximately

2.8 notices during the year.

444

This assumes an hourly wage of $15 and taxes, benefits, and incentives of $7 per hour. See CFPB Debt

Collection Operations Study, supra note 37, at 17 (reporting estimated debt collector wages between $10 and $20

per hour plus incentives).

291

required validation information, and potentially ongoing costs of responding to a potential

increase in the number of disputes.

The provision will require debt collectors to reformat their validation notices to

accommodate the validation information requirements. The Bureau expects that any one-time

costs to debt collectors of reformatting the validation notice will be relatively small, particularly

for debt collectors who rely on vendors, because the Bureau expects that most vendors will

provide an updated notice at no additional cost.

445

The Bureau understands from its outreach

that many covered persons currently use vendors to provide validation notices.

446

Surveyed

firms, and their vendors, told the Bureau that vendors do not typically charge an additional cost

to modify an existing template (although this practice might not apply given that the final rule

likely will require more extensive changes to validation notices than vendors typically make

today).

447

Debt collectors and vendors will bear costs to understand the requirements of the

provision and to ensure that their systems generate notices that comply with the requirements,

although these costs will be mitigated somewhat by the availability of a model notice.

The validation information will require debt collectors to provide certain additional

information about the debt, which will require that debt collectors receive and maintain certain

data fields and incorporate them into the notices. The Bureau believes that the large majority of

debt collectors already receive and maintain most data fields included in the final validation

information. However, some respondents to the Debt Collection Operations Study reported that

they do not receive from creditors information about post-default interest, fees, payments, and

445

See id. at 33.

446

In the Operations Study, over 85 percent of debt collectors surveyed by the Bureau reported using letter vendors.

Id. at 32.

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Id. at 33.

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credits.

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These debt collectors will have to update their systems to track these fields. The

Bureau understands that such system updates would be likely to cost less than $1,000 for each

debt collector.

449

At least one industry commenter asserted that one-time compliance costs would be

significantly higher than $1,000, at least for collectors of medical debt. This commenter

estimated costs of between $22,000 and $31,000 for implementation. The commenter noted that,

for collectors of medical debt, an itemization of charges requires information about payments by

the consumer’s health insurance, increasing the complexity and cost of tracking the necessary

information. The Bureau acknowledges that costs may be higher for some debt collectors.

However, the Bureau’s estimate is based on responses to the CFPB Debt Collection Operations

Study, more than half of which came from debt collectors of medical debt. As such, the Bureau

believes that, on average, its estimate of less than $1,000 in one-time costs is reasonable.

If debt collectors adjust their systems to produce notices including the new validation

information, the Bureau does not expect there would be an increase in the ongoing costs of

printing and sending validation notices. However, there could be ongoing costs related to the

validation information requirements if the required data are not always available to debt

collectors.

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The Bureau understands that some creditors do not currently track post-default

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In the Bureau’s Operations Study, 52 of 58 respondents reported receiving itemization of post-charge-off fees on

at least some of their accounts. Id. at 23.

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Id. at 26.

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One industry trade group estimated that a n itemization requirement would cost $600 m illion in professional f ees

to conduct legal analyses of HIPAA complia nce for medical debt, $30 m illion for one-time system reprogramming

for debt collectors, and $3 billion for one-time system reprogramming for creditors. The proposal a llegedly would

also result in billions of dollars in ongoing support costs and uncompensated medical care because, a ccording to the

commenter, the proposed requirement, if a dopted, would increase the risks that hospitals might be unable to use debt

collectors. As discussed in part V, the itemization requirement should not raise issues of HIPAA compliance that

would require creditors to engage legal counsel in order to provide the required information, as HIPAA privacy

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charges and credits in a way that can be readily transferred to debt collectors. However, the

Bureau’s understanding is that most creditors, including medical providers, do track this

information, and many debt collectors already provide this information on validation notices.

Further, debt collectors are already required to disclose an itemization for some types of debt in

at least one jurisdiction, New York State.

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