If your organization was planning on submitting a comment to the Consumer Financial Protection Bureau's (CFPB) Supplemental Notice of Proposed Rulemaking (SNRPM) for time-barred debts, it's time to set your calendars. The SNPRM is set to be published in the Federal Register tomorrow, March 2, which means the clock for the comment deadline—set to expire 60 days after publication—is ticking.
The 60-day mark falls on May 2, which is a Saturday so it is likely that the due date will be the following Monday or the Friday immediately prior. In the current version, there is still a placeholder on the due date, but that might be updated tomorrow when the actual text of the Federal Register notice—rather than just the PDF—is published.
The SNPRM proposes to govern how debt collectors proceed with accounts where the debt is beyond the applicable statute of limitations for a creditor to sue the consumer to recover.
On its face, the rule attempts to take certain time-barred debt requirements from a couple of states and make them applicable nation-wide. There are several good points made by the CFPB, the most important of which is that consumers don't understand the concept of an account being time-barred nor the consequences of making a payment on such account unless such information is disclosed to them.
When digging deeper into the proposal, certain issues arise. For example:
- Consumers might be confused by "double disclosures," which the SNPRM requires if the applicable state has a verbatim time-barred debt disclosure it requires debt collectors to follow. It would be better if there was an exception to the SNPRM rules—at least as it relates to the script of the disclosure—for accounts in states where a verbatim disclosure is already provided by law.
- The SNPRM conflicts with certain state laws, making the collection of time-barred debts nearly impossible as a practical matter in those states. The SNPRM requires that any state-specific disclosure be placed on the reverse side of the letter, whereas some states require that their time-barred debt disclosure appears on the front of the letter.
- The SNPRM attempts to help alleviate the complexity of determining when a debt becomes time-barred by implementing a "knows or should know" standard for the debt collector. This is an improvement from strict liability; however, without narrowing down what "should know" means, the issue will be left for courts to decide through the endless litigation that is likely to occur.
- There is concern about the CFPB exceeding its scope of authority in the SNPRM.
These are all things that should be taken into consideration and commented on by anyone in the industry who might be impacted by the rules.