A Guide To Regulation F And How It Impacts Debt Collection

A Guide To Regulation F And How It Impacts Debt Collection

Congress first passed the Fair Debt Collection Practices Act (FDCPA) back in 1977, governing the debt collection industry to this day. However, Regulation F is the first serious update to the FDCPA and will have a significant impact on debt collectors and creditors and how they conduct business.

Are you aware of what Regulation F is and how it has changed the debt collection industry? Our experts explain everything you need to know.

What is Regulation F?

While Regulation F is large, complicated, and institutes many changes for your organization, the main points of the ruling are relatively clear.

First—debt collectors can no longer sue or threaten to sue over time. When a debt’s statute of limitations expires, the debt is considered time-barred. Under old rules, collectors could still take legal action against a debtor, but Regulation F has changed that.

Next, collectors can no longer report a debt to a credit bureau before contacting a consumer. Previously, collectors used a tactic called “passive collection” and waited for the debtor to notice the damage to their credit and would then contact their collector to resolve the debt.

Regulation F prohibits this and must contact you before placing an account on your credit record.

Additionally, collectors must supply more information to the debtor. Previous rules stated that the information in a Notice of Debt only needed to be minimal, while Regulation F requires collectors to provide much more detailed information. The updated details surrounding the Validation Notice can be found on the Consumer Financial Protection Bureau’s website.

Regulation F clarifies that text messaging and email may be used to contact a debtor, although the consumer can specify what communication methods the collector is allowed to use. If a consumer opts out of a specific medium of electronic communication, they must disclose to the debtor a reasonable, simple, and free alternative method of contact. 

In addition, Regulation F also places strict limits on how often a collector can contact a debtor, as they cannot call more than seven times in seven consecutive days and must wait seven more days to call again after speaking to a consumer.

Regulation F impacts on creditors in a handful of different ways. For one, creditors now must choose third-party collection agencies that comply with Regulation F. This also means creditors need to be more engaged with their third-party collectors.

Also, keep in mind that collectors may be more apt to sue in the case of a debt nearing its statute of limitations. 

Furthermore, reputable debt collectors may still collect, but the above changes must be made to their practices. Collectors will need to provide much more information about the debt in question from the very start while giving debtors the opportunity to dispute or settle a debt before it reaches a credit bureau. 

Those collecting on their own accounts are subject to all the provisions of Regulation F, all while the new law changes creditor communication practices in a much stricter way.

Does your agency need Regulation F compliance audits, reviews, or consultancy? Whether it be our software or our industry-trusted, experienced experts at TEC Services, we’re here to help you. Contact us now: (941) 375-0300.