Debt collectors will face new restrictions under amendments to collection compliance laws that take effect November 30.
The changes to the federal Fair Debt Collection Practices Act (FDCPA) include provisions that limit the number of phone calls debt collectors can make to debtors, that require debt collection companies to provide an easy way for consumers to opt out of electronic communications, and that prohibit debt collectors from communicating with customers at inconvenient times and/or places.
In general, the FDCPA governs how debt collectors operate and prohibits them from using deceptive or unfair practices to collect consumer debt.
The FDCPA applies to third-party debt collectors, including banks and credit unions that collect their own debts under other business names. Although financial institutions recovering debts in their own names are not considered debt collectors, they should still comply with the spirit of the FDCPA and avoid abusive practices.
Avoid Potential UDAAP Violations
Many financial institutions will want to comply with certain aspects of the new rules to avoid potential UDAAP violations: unfair, deceptive, and abusive acts or practices. UDAAP violations include actions such as harassing the debtor with call after call, not respecting opt-out wishes, or trying to contact the debtor through a work email address.
The changes to the FDCPA bring the debt collection law into the 21st century by providing rules for collectors about contacting debtors via text messages, email and direct messaging via social media platforms as well as via the telephone.
Let's take a deeper look at some of these new rules.
Restrictions on the Frequency of Telephone Phone Calls
The amended law prohibits a debt collector from calling a consumer about a specific debt more than seven times within seven consecutive days. In addition, if a debt collector speaks with a debtor, the collector is not allowed to contact that debtor again about the same debt within seven consecutive days of the conversation. The first day of the seven consecutive days is the date of the telephone conversation.
However, these restrictions apply to each specific debt, not each consumer. That means a debt collector can call a debtor more often if that individual owes more than one debt.
Consumers Can Opt Out of Communications
A debt collector who sends a debtor an email, text, or other electronic communication must also provide a way for that consumer to easily opt out of receiving those communications. The changes to the FDCPA also prohibit the debt collection agency from requiring a consumer to pay a fee to opt out or asking for any information except the debtor's opt-out preferences as well as the email address, telephone number for text messages, or other electronic-medium address about the opt out request.
Collectors Cannot Email Debtors at Work Under Most Circumstances
Under the updated rules, a collection agency is not allowed to contact debtors by sending an email to their work email address. However, the debt collector may send messages to the consumer's work email if that consumer has used that work email to communicate with the collector and has not opted out. Or if the debtor gave the collector permission to use the work email address and hasn't revoked that permission.
How MeridianLink Collect Can Help
Although the FDCPA only covers third-party debt collection agencies, not the first-party collection efforts of our customers who own the accounts and are seeking repayment, most bank and credit union best practices typically model those of the FDCPA.
To that end, the following functionality will be added to MeridianLink Collect to help keep you within the guidelines of the amended FDCPA.
- Telephone Call Frequency: a call-tracking feature to support this requirement
- Opt Out of Communications: the ability for users to indicate when consumers opt out of emails or telephone calls (this is already in place for SMS)
- Inconvenient Time/Place Communication Restrictions: the ability to scrub email addresses of the debtors in MeridianLink Collect to alert you to double-check potential workplace email addresses before sending emails; other aspects of this provision of the rule such as not calling/texting/emailing before 8 a.m. or after 9 p.m. (in the debtor’s time zone) can be handled outside of the system through policy
We are putting these tools in place to assist you, but ultimately you will have to rely on your compliance policies to ensure you're in full compliance with the new regulations. It's important to note that while MeridianLink products offer compliance functionality, the software cannot take the place of your compliance officer. MeridianLink Collect is simply one tool out of many that can help you assess your compliance risk.
Learn More about MeridianLink Collect
Formerly known as XpressCollect®, MeridianLink Collect helps you easily and efficiently manage your delinquencies. This cloud-based debt collection software provides unmatched benefits with a sleek user interface that delivers the ultimate user experience. It's so simple, everyone on your team can be trained to set it up and manage it. MeridianLink Collect collection software not only replaces tedious workflows of the past with increased automation, sophisticated analytics and easy-to-use functionality, it also evolves with your financial institution's operations and goals.
The information contained herein shall not be construed as legal advice.