Reg. F: Finally, clear rules apply to debt collection

April 27, 2022 – While it may seem counterintuitive, what protects consumers could also be protective for debt collectors and good for business in general. Regulation F, with its clear rules for debt collectors to follow, gives consumers greater control over the methods and timing of communications and, in doing so, reduces the legal exposure of debt collectors who respect expressed preferences. by consumers.

This is a timely set of rules given inflation and rising interest rates which create the potential for a severe economic downturn and a significant increase in consumer defaults on all markets, especially the subprime sectors.

As Regulation F is one of the most comprehensive changes in debt collection regulations, below is a summary of the rules that must be followed and why they are important.

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Context and entities covered

The Consumer Financial Protection Bureau (CFPB) implemented Regulation F on October 30, 2020 and December 18, 2020, interpreting the Fair Debt Collection Practices Act (FDCPA). The FDCPA is designed to protect consumers from abuse and harassment during debt collection and to ensure that they receive transparent and accurate information regarding their debts. Dodd-Frank amended the FDCPA, giving authority to the CFPB to create rules for debt collection.

Effective November 30, 2021, the new CFPB rules establish a clear framework within which debt collectors must operate.

The rules apply to debt collectors and generally not to creditors. This would include anyone who uses interstate commerce or the mail in a business for the primary purpose of collecting debts, or who directly or indirectly collects or attempts to collect regularly debts owed or claimed by another party. Additionally, a creditor who uses a name other than his own in the collection process “which would indicate that a third party is collecting or attempting to collect such debts” would be covered by the rules.

Consumer communications covered

Regulation F imposes certain limits on debt collectors in their contact with consumers to ensure that the consumer is not abused or harassed in this process.

Who can be contacted: Collection agents can only communicate with the following people in connection with the collection of a debt:

•The consumer.

• Consumer Advocate.

• A consumer reporting agency, if otherwise permitted by law.

•The creditor.

•The creditor’s lawyer.

•The debt collector’s lawyer.

When and where: Collection agents cannot contact a consumer:

• At an unusual time or known (or to be known) as inopportune,

• In an unusual location or a location known (or should be known) to be inconvenient to the consumer, or

•In his place of work if the collector knows or has reason to know that the employer prohibits the consumer from receiving such communication.

How frequently: Collection agents cannot contact a consumer:

• More than seven times in seven consecutive days or

• Within seven consecutive days after a telephone conversation with the consumer in connection with the recovery of such a debt.

There are exceptions to the issue of call frequency. For example:

•When the consumer has given his prior agreement directly to the collection agent.

•When the telephone call does not reach the dialed number (busy tone, number out of service).

•When the debt collector contacts the consumer’s lawyer, a consumer reporting agency, the creditor, the creditor’s lawyer or the debt collector’s lawyer.

However, if a consumer asks the debt collector not to communicate with him via a certain medium, the debt collector must refrain from using this medium. If the consumer declines to receive electronic communications from the debt collector, the debt collector may send an electronic communication to confirm this opt-out request, but without any other information in this communication. If the consumer uses the prohibited medium to contact the debt collector, the debt collector can respond only once via this medium.

Avoid false, misleading or misleading representations or means

A central tenet of these regulations is that the debt collector shall not use false, misleading or misleading representations or means in connection with the collection of any debt.

Here are some examples of prohibited behavior:

•Suggest that the debt collector is affiliated with the federal or state government.

• Suggesting that an individual is a lawyer.

•Suggest that the consumer has committed a crime or conduct intended to dishonor the consumer.

Furthermore, the collector cannot misrepresent the character, amount or status of the debt. A collector cannot threaten arrest, imprisonment, garnishment, seizure or sale of property unless these actions are legal and the creditor intends to take such action.

A debt collector cannot take action or threaten to take action that cannot legally be taken. Nor can they threaten to take actions that they do not actually intend to implement.

Collection agents may not use written communications that simulate or falsely represent that the document is authorized, issued, or approved by a court, state, or government official or agency.

The regulations also define a prescribed debt and a debt collector is not allowed to sue or threaten to sue for a prescribed debt.

Meet consumers where they are

In an attempt to modernize and keep up with the way customers want to communicate, the new regulations deal with electronic communications. Collection agents may use email and text messages, but must maintain reasonable procedures regarding email and text messages to avoid sending communications to unauthorized third parties. Thus, the debt collector should be aware of how he obtained the email address and whether the consumer has consented to its use.

For example, a collection agent can send email communications:

• If a consumer has communicated with the debt collector using an email address and the consumer has not opted out of receiving email communications or

• If the debt collector has received prior consent directly from the consumer to use the email address to communicate about the debt and this consent has not been withdrawn or

• If a creditor has obtained the consumer’s e-mail address or

• If the creditor used the email address to communicate with the consumer about the account and the consumer did not ask the creditor to stop.

A debt collector can send SMS if:

• The consumer used this phone number to communicate with the debt collector about this debt via text message and has not since opted out of receiving text messages and the debt collector has other assurances such as:

• Within the last 60 days, the consumer sent a new text message to the debt collector from this number; or

• Within the past 60 days, the debt collector has confirmed that the phone number has not been reassigned from the consumer to anyone else since the date of the consumer’s last text message.

• Alternatively, the debt collector has received prior consent to use the number to communicate with the consumer about the debt via SMS and the consumer has not withdrawn that consent and the debt collector has other assurances such as :

• Within the last 60 days, the debt collector has obtained this prior or renewed consent from the consumer or

• Within the last 60 days, the debt collector confirmed that the phone number has not been reassigned to anyone else since the date of the most recent consent.

There is an honest mistake defense under the FDCPA (Section 813(c)). If the Debt Collector has followed the text messaging and email procedures detailed in Regulation F and has implemented reasonable procedures to limit communications to authorized parties only, then they fall within the safe harbor.

Look forward

Although the parameters of Regulation F are more detailed than we have summarized here, the bottom line is that these tips will take the guesswork out of the interactions between debt collectors and consumers. It will also likely require investment in technology, as collectors will need to ensure that their automated systems integrate these regulations into their processes and carefully train their teams. In the long run, clear lines will make the collection process more predictable and reduce the risk of non-compliance.

Joseph Cioffi is a regular columnist on consumer and commercial finance for Reuters Legal News and Westlaw Today.

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.

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