Making Sense of the Recent Changes in Federal Debt Collection Law
By Attorney Crystal Banse
Without a doubt, one of the most frustrating aspects of being behind on your bills is the collection calls. Many of our clients report constant calls, often with different numbers from morning until night. They are afraid to pick up an unknown number for fear it’s a debt collector on the other end of the line, sometimes missing an important call. As if the calls aren’t bad enough, debt collectors can now contact consumers on social media, thanks to a recent federal consumer protection law update.
But ultimately, these changes are intended to clarify debt collectors’ ability to contact consumers using newer technology and further regulate their activity, expanding consumer protection. On November 30, 2021, a significant update of the Fair Debt Collection Practices Act (FDCPA) came into effect. Under these changes, consumers got more control over how debt collectors communicate with them. In contrast, debt collectors face more restrictions and disclosure requirements.
The Fair Debt Collections Practices Act (FDCPA) is a federal law that attempts to eliminate abusive debt collection and promotes fair debt collection. Initially enacted in 1977, the Act creates a framework under which third-party debt collectors can conduct business. It also defines the rights of consumers facing debt collection, providing penalties for violations. Wisconsin has its own set of debt collection regulations; the Wisconsin Consumer Act was first enacted in 1971, predating federal protections and offering similar protections.
Before these most recent updates, the Act included general language that was easily misinterpreted and caused confusion by consumers and debt collectors alike. This resulted in years of lawsuits and different interpretations by courts throughout the country. The new rules aim to clarify these provisions and build upon the protections initially intended by the FDCPA. Here are the most significant takeaways for consumers:
Debt collectors now have bright-line restrictions on the frequency of phone calls they can make to consumers. Under the modified law, a debt collector cannot call a consumer more than seven times within seven consecutive days or for a week after speaking to the consumer about it on the phone. These restrictions apply to each debt individually, so a consumer with multiple debts may still receive numerous calls per day. Consumers can waive these limits voluntarily; the limitations do not apply to calls that don’t connect; nor to calls to your attorney (lucky us). There are no specific restrictions on the number of texts or other electronic communications. Still, the FDCPA’s general prohibition against harassment applies.
Debt collectors can only contact consumers between 8 a.m. and 9 p.m. their local time. Previously the Act prohibited collectors from reaching consumers at “unusual” or “inconvenient” times but never expanded on those definitions. These new rules explicitly state that it is inconvenient to communicate with the consumer before 8 a.m. and after 9 p.m. their local time. This timeframe also applies to electronic communications.
Debt collectors are only permitted to leave “limited-content” voicemails. Under this rule, a collector may leave a voicemail for a consumer. Still, it can only contain their business name and callback information. The business name must not indicate that the company is in the debt collection business, which will prove a challenge for a collector with a giveaway name. Perhaps a wave of name changes will be coming. The purpose of this new rule is to allow collectors to leave messages without inadvertently disclosing a debt to a third party.
Consumers can stop specific collector communications. If a consumer requests the collector stop calling, texting, or emailing, the collector must cease contact via that channel. For all electronic communications, the debt collector must provide a way to easily opt-out without requiring any additional information from the consumer. Consumers can even go as far as to stop written communications altogether, but it is usually not recommended, as it can increase the likelihood of a lawsuit and keep them in the dark about their debt.
Debt collectors may contact consumers via social media but must make opting-out easy. The update acknowledges the newer technologies like social media that debt collectors can use to communicate with consumers but limits how they can use it to collect debt. If a debt collector chooses to contact a consumer on social media, they must do so privately, meaning not posted publicly or where contacts can see. The debt collector must also identify themselves in any connection requests or private messages, and their profile must accurately match the name given to the consumer. The opt-out requirement applies here as well.
Creditors generally cannot contact consumers using their work email. Considering many people have publicly available emails available for employment, this is a relief. The new rules define contact through a work email as contact at an “unusual place.” The only time a debt collector is permitted to send a message to a consumer at their work email is if it was previously provided or authorized them to do so. A consumer can withdraw consent and opt-out anytime.
Debt collectors must now automatically provide additional information to consumers when they first communicate with them. The FDCPA previously required debt collectors to provide a validation notice to consumers with basic information about the debt and consumer protection rights. The update dramatically expands on debt collectors’ required disclosures, intended to help consumers identify the debt and make it easier to assert their rights, including a tear-off dispute form with prompts. The rule provides a model form for optional use. It allows for disclosure to be made orally if the consumer permits. Because of the volume of information required to be disclosed, consumers should always request the validation in writing. Electronic validation notices are allowed.
A debt collector cannot sue or threaten to sue a consumer over a debt where the statute of limitations has expired. The new rules clarify that a debt collector cannot bring a lawsuit or threaten legal action against a consumer for a time-barred debt. A “time-barred debt” is defined as one for which the applicable statute of limitations has expired. In Wisconsin, the statute of limitations for a debt collection case is 6-years. It begins on the last payment date on an account, so the clock restarts anytime a consumer makes a payment on a debt. This rule applies regardless of whether the collector knows the debt is expired.
Debt collectors are required to take specific actions before reporting adverse consumer information to the credit bureaus. Therefore, a debt collector cannot provide information to a credit bureau before speaking to the consumer or sending the validation notice. If sent in the mail, the debt collector must wait 14 consecutive days to receive notification of undeliverability before reporting to the bureaus. The intent is to protect consumers from having debts prematurely reported and hurt their credit ratings.
The reaction to the new rules has been mixed. Consumer advocates think that the new regulations don’t go far enough to protect consumers and open the door for more avenues of debt collection abuse. Debt collectors fear increased FDCPA violations and further regulation. From a consumer lawyer standpoint, I think these changes are more beneficial to consumers than harmful, and a wave of litigation to further clarify the rules is likely coming.
As a consumer, always know your rights regarding debt collection and make sure you assert them. If you are a consumer living in Wisconsin and feel that a debt collector has violated your rights, please get in touch with us today for a complimentary consultation and case assessment.
We have successfully represented hundreds of consumers throughout the state since 2017.