Earlier this month, the employees of Capital Recovery Corporation participated in intense training on the updated amendments to Regulation F, a set of Federal Reserve rules that establish limits on the risks banks that have deposits insured by the Federal Deposit Insurance Company (FDIC) may take on in their business dealing with other financial institutions.
These amendments were proposed by the Bureau of Consumer Financial Protection. They will more specifically look to make changes to 12 CFR Part 1006, which implements the Fair Debt Collection Practices Act, to prescribe Federal rules governing the activities of debt collectors covered by this document. These changes are effective on November 30th and will change the way debt collection agencies operate moving forward.
What do These Changes Mean for Capital Recovery Corporation?
These changes to Regulation F will shift the way collections agencies utilize the Validation Notice, methods for electronic communications between the agency and debtors, and more. With so many changes, it can be difficult for consumers to understand how this can affect their interactions with a collections agency. To help, read on for part one of our two-part series on these changes and what consumers can expect.
Changes to the Validation Notice and Validation Information
Last week, we explained what a Validation Notice is and why you might receive one of these documents in the mail. Put simply; a Validation Notice is the written or electronic notice that provides the validation information required by Regulation F.
Changes to Regulation F will establish a new perception of this validation process, distinguishing the difference between the Validation Notice and validation information. The Validation Notice is now the vehicle by which debt collectors convey information about the debt to the consumer. This may be done orally, in writing, or via electronic means. Validation Information means details about the debt and the collections process.
Itemization Date of a Debt
The term Itemization of a Date refers to one of five possible dates the debt collector can ascertain the amount of the debt owed on that date. Put simply, these new changes to Regulation F allows a collector to choose which one of those five possible dates the debt collector can accurately recite the amount of debt to the consumer on that date. These dates include:
1) Last statement date;
2) Charge off date;
3) Last Payment Date;
4) Transaction date;
5) Judgement date.
Which Itemization Date to Use
How does a debt collector decide which of the itemization dates to use? The most important thing a debt collector can consider to choose which itemization dates to use is to ask, “Which information can I get most consistently, reliably, and most accurately from each one of that collector’s clients?” The answer to this question may change based on each client and each portfolio for a debt collection agency, which is why the ability to choose one of the dates listed above is so imperative.
Validation Period
Determining when the consumer received debt validation, known as the Validation Period, has traditionally been a guesstimation for collectors. The recent changes to Regulation F provide clarify on the timeline that accounts for legal holidays and weekends, a 5-day assumption, and other timing considerations that impact receipt of subsequent Validation Notice(s). Implementing this new dating system will require system programming updates and new fields in software that collection agencies use to track the dates in their communication to debtors.
Consumer Response Information
Another change to the Validation Notice gives consumers the option of how to respond to a Validation Notice. These changes are new, and debt collectors are now required to include the following phrases:
- How do you want to respond?
- Check all that apply
Immediately below the phrase “Check all that apply,” the collector is required to list options, which are:
- I want to dispute the debt because I think…
- This is not my debt
- This amount is wrong
- Other: Please describe on the reverse or attach additional information
- I want you to send me the name and address of the original creditor
- I enclose this amount (with a blank line)
In addition to including these specific phrases and options, the Consumer Response information must also be located in a separate location from the other validation information, as well as any optionally permitted information. It must also be located under the initial two phrases listed above.
Next week, we’ll continue to share more information about changes to Regulation F and what these mean for collections agencies related to the way they communicate with debtors, such as call frequency, emails, and text messages.