On October 29, the CFPB published additional frequently asked questions on Regulation F, its final debt collection rule, as well as a guidance document. The new FAQs address validation notice requirements (including for residential mortgage debts) and the guidance document deals with how to disclose the validation information on the itemization table on the model validation notice. Regulation F is effective November 30, 2021. (Last month, the CFPB published FAQs on the rule’s limited-content message and call frequency provisions.)
Debt Collection Rule FAQs Update
Debt collectors may use Model Form B-1 in Appendix B to Regulation F to comply with the validation information content and form requirements of § 1006.34(c) and (d)(1). The CFPB’s new FAQs on validation information address the following questions:
- What information is required?
- Is there a model validation notice?
- Is use of the model validation notice required?
- Can the model validation notice be changed?
The CFPB’s model validation notice (in both English and Spanish ) contains five categories of validation information: (i) debt collection communication disclosures; (ii) debt-related information; (iii) itemization-related information; (iv) information about consumer protections; and (v) consumer-response information.
The CFPB expects a validation notice to contain all such required information—this is a communication from a debt collector; information about the debt; amount owed and itemization; where consumers can go for information about protections; and a way to respond—in the required format. Debt collectors who use the Bureau’s model validation notice have a “safe harbor” for compliance with the content and format requirements.
The CFPB explicitly states that the final rule “does not require a debt collector to use the model validation notice” and that use of the model notice “is one way to comply to comply [with the content and format requirements in Regulation F.]” It states further that debt collectors who choose “not to use the model validation notice” or who make “changes that are not specified in the Rule,” resulting in a notice that is not substantially similar to the model validation notice, do not necessarily violate the final rule. They will not, however, be able to avail themselves of the safe harbor protection in a lawsuit or a supervisory context.
The Bureau also published new FAQs on validation information for residential mortgage debt that address the following questions:
- Is there a special rule for residential mortgage debt when disclosing itemization information?
- What information may be omitted?
- Is there safe harbor protection for residential mortgage debt?
- What is the “most recent periodic statement” for purposes of the Mortgage Special Rule?
- What itemization date is used for the Mortgage Special Rule?
An itemization of the debt is generally a required component of a validation notice. However, under the final rule’s special rule for certain residential mortgage debt in § 1006.34(c)(5) (Special Rule), debt collectors can instead provide the most recent periodic statement required by Regulation Z as a substitute for the itemization-related information. The CFPB indicates that the statement can be one that was provided by the debt collector (as long as that periodic statement was required by Regulation Z at the time it was provided). The statement must be included in the same communication as the validation notice. In the space on the validation notice where a debt collector would have put the omitted itemization information, the debt collector could provide the statement, “See the enclosed periodic statement for an itemization of the debt.”
The itemization-related information that debt collectors using the Special Rule are permitted to omit from the validation notice consists of the (i) itemization date; (ii) amount of the debt as of the itemization date; and (iii) itemization of the current amount of the debt. However, the Bureau does explicitly (and emphatically) point out that “while the Itemization Table on the model validation notice includes the validation information that may be omitted, it also includes the current amount of the debt, which is validation information that may not be omitted from the validation notice under the Special Rule. A debt collector who uses the Special Rule must still disclose the current amount of the debt on the validation notice.” The CFPB also points out that although a debt collector using the Special Rule does not need to disclose an itemization date on the validation notice, it still needs to determine the itemization date to disclose the other date-dependent validation information.
Although confirming that the safe harbor remains available to a debt collector who uses the model validation notice but also complies with the Special Rule, the CFPB stated that the safe harbor is limited to compliance with validation information and format requirements for the information provided in the actual model validation notice only. The debt collector does not receive a safe harbor for the content and format requirements for the content included in the periodic statement.
Debt Collection Rule: Disclosing the Model Validation Notice Itemization Table
In addition to its new FAQs, the CFPB also published a guidance document, “Debt Collection Rule: Disclosing the Model Validation Notice Itemization Table.” The Bureau indicates that one way a debt collector using the model validation notice may, but is not required to, complete the Itemization Table is by using the following four steps:
- Select the itemization date.
- Determine the amount of the debt as of the itemization date.
- Determine the Itemized Amounts since the itemization date.
- Determine the amount of the debt.
In the guidance document, the CFPB provides a detailed discussion of each of these four steps. It also provides example itemization tables illustrating how a debt collector could complete the Itemization Table when collecting various types of debts. The types of debts illustrated in the examples are credit card debt, residential mortgage debt, medical debt, and multiple medical debts owed by the same consumer.