Regulation F (Reg F) has led to increased conversations about consumer contact, especially when it comes to two important terms: Preference and Consent. These terms may sound similar, but they are not interchangeable. And there is a lot of risk - regulatory, legal, and strategic - in confusing the two.
Those confused about the differences might email or text someone without their consent (i.e., legal / regulatory risk) or miss potential contacts with consumers by failing to take advantage of their preferred methods of contact (which may not require consent, but will impact business outcomes).
But wait, there's more! You also need to understand how Preference and Consent relate to Inconvenient Calling Times/Places/Mediums under the Fair Debt Collections Practices Act (FDCPA) if you want to avoid adding an additional, substantial layer of risk.
Looking for a primer on the differences between consent, preference and inconvenient calling times/places? You found it.
Regulation under Reg F vs. Suggestion
Before we get to the differences between Consent and Preference, it’s important to note a concept which already existed under the FDCPA, but has received some new fame under Reg F: Inconvenient Times/Places. Reg F makes it clear that if a consumer notifies your agency that a particular medium (e.g., email, phone, text) is inconvenient, or that a particular time or place is inconvenient, you must not contact the consumer through that medium, or at that time, or at that place.
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Consent often refers to consent to dial a cell phone under the TCPA. There are rules and requirements under the TCPA regarding this topic; however that is a different article for a different day.
- Reg F requires a consumer to consent to receive email and text communications or refers to consent a consumer might provide after the consumer has previously designated a time or place as inconvenient.
- Reg F does not require a consumer’s consent to make an outbound call (unless of course the consumer has opted out of calls or stated phone calls are inconvenient).
Preference is just what it sounds like: obtaining and using the method of contact that consumer prefers. Though it’s mentioned in Reg F, the new rule does not explicitly require companies to use the consumer’s preferred method of contact, nor does it require you to determine the consumers preference before sending a communication.
That said, a consumer might say they prefer not to be contacted at a specific time or place, in which case your agency would be required to abide by that preference (since they are notifying you of an inconvenience).
Reg F now imposes certain requirements creditors must follow for an agency to rely on consent to email provided by a consumer to a creditor.
For example, if a consumer has provided consent to be contacted via email and text, and has not designated any medium of communication as inconvenient, you can contact them using any of these mediums, even if they seem to prefer one over the others. However, if a consumer provides an email address and states “don't text me or call me ever again,” your agency would only be allowed to communicate with that consumer via email.
There are potential legal ramifications for taking certain actions without the consumer’s consent. However, there are no such legal ramifications for ignoring communication channel preference (yet), unless the consumer has specifically told you that other communication channels are inconvenient.
New requirements for creditors/issuers
Consent is almost always initially captured by creditors/issuers. For instance, if you sign up for a new credit card, your terms of service may include permission to contact you via SMS, email, etc. You have to give the company permission to contact you using those methods, and typically, that involves also providing the creditor your cell phone number or email address. Creditors/issuers commonly transfer consent to first party agencies, and more recently, transfer to post-charge off, third-party collections partners.
However, Reg F now imposes certain requirements creditors must follow for an agency to rely on consent to email provided by a consumer to a creditor.
Reg F does not provide a means for consent to text provided to a creditor to be passed through to an agency. Consent can certainly be obtained or revoked while an account is with a third-party collection agency, but it often originates from the creditor and doesn’t change unless specified by the consumer.
Preference can also be captured by the creditor/issuer, however, the mechanisms to transfer this information to third-party collections partners are not well developed. The concept of preference is newer, especially in the third-party collections space (not least because outreach beyond snail mail and phone calls is relatively new in this space, too).
Best practice: capture and validate Preference throughout the lifecycle of an account, since a consumer’s preference could easily change especially once an account is charged off.
What this means for your collections strategy
Remember this: Consent says can. Preference says should.
In establishing your collection strategy it's important to recognize the distinction between these two concepts. Without consent, there are certain things your agency cannot do. Not knowing the consumer's preference will not affect your strategy; however knowing a consumer’s preference can help you determine the best strategy.
For example: if a consumer has not designated email as inconvenient and you know you can contact them via email (because the original creditor did what they were required to do under Reg F, thus you have consent), and it’s cost effective, there’s no reason not to use that contact method. However, if you know the consumer doesn’t respond to email, and they prefer SMS and have given you consent to use SMS, why would you use email as a contact strategy when you know it won’t work? Building a cost-effective and efficient contact strategy requires using both consent and preference to achieve the best results. Each company’s approach will vary; with some choosing to focus on cost first, and some focusing on results first. Either way, looking first at consent and then at preference when building strategy will have an impact.
Until recently, the only control a consumer had over contact was consent. Now, with the increased focus on consumer empowerment, understanding consumer preference is key to a healthy collections strategy.
Erin Kerr is the Director of Content for iA Strategy & Tech - a digital resource for collections strategy executives - and the Executive Director of the iA Innovation Council. She is a seasoned receivables management professional, with recent experience in digital strategy and a passion for crafting digital solutions for a better customer experience.
Missy Meggison is General Counsel and Executive Editor at insideARM and the Executive Director of the Consumer Relations Consortium.