Here’s what you need to know about the new regulation, which is now in effect.
November 30 was the effective date for Regulation F, a new rule from the Consumer Financial Protection Bureau (CFPB) interpreting the Fair Debt Collections Practices Act (FDCPA). Released after several years of preparation, the complex rule largely governs third-party debt collections agencies and covered attorneys collecting past due rental obligations, with limited impact on their property manager clients. However, the rule is worth reviewing to ensure that agency and property manager are properly aligned on processes for debt documentation, itemization and dispute handling.
Regulation F:
- Clarifies the process for text and email message disclosure, opt-out and contact preferences in relation to debtor contacts, bringing the 1977 statute in line with contemporary consumer contact technology. As a result, agencies may look to property managers to confirm lease language authorizing tenant contacts, as well as tenant contact history.
- Requires that collections agencies provide new detailed disclosures in the initial validation notice sent to the debtor, including an itemization of the debt as of a specific date, a more detailed consumer rights description, and an easy-to-use tear-off form for debtors. Debtors and their counsel frequently use debt validation requests, requiring property managers and other creditors to prove the amount and detail of the debt are legally supported with compliant, signed documentation. To ensure compliance, property operators may wish to review their debt itemization and dispute reinvestigation processes.
- Requires that an attempt be made to contact the debtor before credit reporting begins. The CFPB has taken increasing interest during the Biden Administration in the accuracy of credit reporting and the sufficiency of reinvestigations conducted by property managers and other creditors where a consumer disputes a debt.
- Clarifies limits on permitted frequency of debtor contact to ensure debtor outreach does not constitute harassment. Potentially, the call frequency limits may be used as a standard of reference when assessing first-party collection activities too.
The National Apartment Association (NAA) encourages members to consult with their collections agency or attorney to ensure they are fully prepared for consumer disputes and documentation requirements under the new rule.
The rule comes from an agency that has ramped up its public attention to rental housing. In 2021 alone, the CFPB:
- promulgated new CDC eviction protection notice requirements for certain rental housing collections,
- issued an enforcement bulletin reminding rental housing providers of their dispute reinvestigation and accuracy obligations in credit reporting COVID-impacted renter payment history, and
- sent reminder letters to rental housing providers about military servicemembers’ tenant protections under the Servicemembers’ Civil Relief Act.
NAA will continue to voice the concerns of apartment owners and operators to ensure that new federal consumer protection regulations do not overreach and create expensive new liability and compliance obligations that harm rental housing availability.
For more information, please contact Jay Harris, Esq. at [email protected] or at (240) 374-5440.