Regulatory requirements for digital debt collections


  • New regulations regarding debt collections processes are going into effect in November 2021.
  • The regulations reflect the modern reality of digital communications.
  • To prepare to comply with the new regulations, collections teams must thoroughly understand the requirements and use digital communications technologies appropriately.

The last time the United States government updated collections regulations, Jimmy Carter was in the White House, and people communicated through telegram and fax.

Four decades and seven presidents later, communications technology has changed dramatically, and regulation regarding collections processes must change as well. In an October 2020 statement, former Consumer Finance Protection Bureau (CFPB) Director Kathleen Kraninger observed: “With the vast changes in communications since the FDCPA was passed more than four decades ago, it is important to provide clear rules of the road.”

To that end, the CFPB has confirmed that two final rules under the Fair Debt Collection Practices Act (FDCPA) will take effect on November 30, 2021. What will that mean for collections professionals?

💻 The time for digital collections is now. Read our guide to find out why digital collections are the way to go.

A look at current debt collection regulations

The FDCPA was signed into law in late 1977. The stated purpose of the law was “to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.”

Various provisions of the law protect consumers from unfair collections practices such as:

  • Excessive phone calls
  • Continued attempts to collect debt not owed
  • Illegal or unethical communication tactics
  • Not providing written verification of the debt
  • Taking or threatening legal action
  • False statements
  • Improper sharing of information

The Federal Trade Commission (FTC) works in harmony with the CFPB to ensure the enforcement of the FDCPA today.

Why the regulatory requirements are changing

Thinking back to when the law was originally passed, mail and phone calls were the two most common ways businesses connected with consumers. Other methods of communication were telegrams and faxes. But communication has changed a lot since the 1970s.

Although collections professionals still may opt to use mail or phone to reach customers with delinquent accounts, those two communication channels may no longer be the best ways to reach people. Digital channels such as text messaging and email have surpassed these legacy channels in terms of usage today.

However, the 1977 law makes no provision for the use of such digital channels. So, even though communications technology has advanced, regulation has been slow to catch up. In an increasingly digital-first landscape, new regulations are necessary.

A look at the two new final rules that impact digital collections

The CFPB has recently finalized changes to the FDCPA, which will go into effect in November 2021. Here’s a look at what’s the same and what is now different.

Many rules will stay the same, such as:

  • Third-party collection agencies can only reach out between 8 AM and 9 PM local time.
  • Collectors cannot contact borrowers at work without permission.
  • No threats or harassment are allowed.
  • Communications must stop if the debtor requests that in writing.

However, new rules update the law for the 21st century. Here are some of the updates:

  • Collection agencies can call borrowers once a day, but if they speak to the borrower, they cannot call again for another week.
  • Phone calls must stop when requested in writing by the debtor.
  • Text messages and emails must include an opt-out option.
  • Work emails are off-limits to collectors.
  • Collection agencies can contact borrowers through social media. They must use direct messages and cannot post publicly to borrowers. They also must include an opt-out option.

What about the frequency of calls, texts, and other messages?

Officially, the new regulations do not place a hard limit on the number of calls and texts you can send to a borrower.

Instead, the regulations place limits on the frequency of messages sent. Collections agencies can make one phone call per day to a borrower, but if they actually speak to the borrower, they cannot make another call for a week.

That being said, the borrower can opt out of any communication channel simply by sending a written request for the collector to stop communication. Borrowers have the power to limit messages under the new regulations.

However, each debt is counted separately. If a borrower opts out of messages for one of their debts, a collections agency can still contact them for any other debts they may have.

The only way for a borrower to refuse all messages is to send a written request for each debt and for each communication channel.

Digital communications channels comply with the new regulations

The CFPB expects that debt collectors communicate with debtors using channels that debtors use. The official wording of this occurs in Section 1006.42 of the new act, which states:

“(1) In general. A debt collector who sends disclosures required by the Act and this part in writing or electronically must do so in a manner that is reasonably expected to provide actual notice, and in a form that the consumer may keep and access later.”

Digital communications channels are now the dominant form of communication. That means collections agencies can use them. That said, debt collectors must be sure that their messages provide actual notice. In the past, this was done by the mailbox rule. Properly addressed mail sent through the USPS was assumed to have been read five days later.

Now, however, debt collectors may use other means to ensure their messages go through, relying on tracking capabilities within their digital communication solutions or social media sites.

How the new regulations help both borrowers and debt collectors

The CFPB’s main job is to protect borrowers from predatory lending and harassment from debt collectors. The new regulations help borrowers by preventing extreme cases of aggressive debt collecting.

They also help borrowers by giving them control over collections messages. Borrowers can keep their workplaces free from messages, and opt out of new messages.

The new regulations also help debt collectors. Until recently, many collectors were afraid to take advantage of new technology. Because existing regulations were old and vague, debt collectors were often cautious to make good use of digital channels. There was a risk of accidentally breaking the law.

Because the new regulations target digital channels, they clear up the confusion. Debt collectors can employ text, email, and social media without fear. Collections agencies now have permission to use these channels, within prescribed boundaries. That is good news for debt collectors, because digital channels not only provide additional ways to reach a new generation of debtors that are digital natives, but also because using digital communications can be much more cost-effective than methods such as mailed letters and live-agent phone calls.

6 must-haves for your best CX

How you can optimize your collections strategy for the new regulations

For communication of any kind to be effective, you must actually reach the person with whom you are trying to communicate, and the best way to do that is to contact them where you know they are. With the proliferation of digital communication channels, the best strategy is to use omnichannel communications.

RingCentral provides advanced contact center solutions that enable inbound, outbound, and digital communications. Our solutions enable debt collectors to send and receive communications across all digital channels, increasing the likelihood that they will be able to connect with debtors via the channel of their choice.

Additionally, reporting and analytics included with our solutions enable debt collectors to easily track their interactions with debtors to remain compliant in the areas of frequency and time of contact. To learn more about our solution for debt collectors, request a demo to see how our platform works.

Originally published Nov 16, 2021, updated Nov 09, 2021

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