The Debt Collection Industry is Changing.
After 40 years of guessing how to avoid a lawsuit in the debt collection industry, the guessing is just about over… and the debt collection rules are going to change.
The newly proposed format in the CFPB’s NPR for the Validation Notice contains several new requirements including your client may need to send additional data, you may need to send more data to your vendors, and you may not be able to collect on certain accounts.
It could also mean that you will have new fields to include for printing or creating the electronic version of the Validation Notice.
Validation Notice Data Points
1. Consumer’s Name
Although this may sound fairly straight forward, it could require a change in data from you to your letter vendor. The new Validation Notice requirement is to include all parts of a consumer’s name if the creditor provides it. First, middle, last and suffix are all required if they are provided.
2. Merchant Brand
Does your client send the Merchant Brand of a credit card debt? The creditor and your client may be the bank that provided the card, but if there is a store or airline brand associated with the credit card, you must include that brand name as well as the creditor’s name.
Although several systems out there automatically mask all credit card numbers, with privacy issues abounding. The CFPB has made it optional, but protected, to mask portions of any account number. Masking every account number; however, might be a little problematic for database management as well as for agency and consumer use.
The amount of debt on the Itemization Date is required and must include any fees, interest or other charges owed as of that date. This may require revising calculations based on some of the new data points below.
4. Itemization Date
This is potentially a large change. Since there are four permissible dates you can select, and you will need to calculate the total amount of the debt including interest, fees, and charges.
Once this date is selected, the consumer’s account needs to have that date consistently applied going forward which means there may be a tracking issue that needs to be addressed in your core system. The four possible dates are:
- The last statement date
- The charge-off date
- The last payment date
- The transaction date
Questions to ask in regards to the Itemization Date
- Does your client provide the date and the calculation of interest, fees, and charges?
- Will your system need to provide those calculations?
- Going forward, do you know how to capture the data?
- Do you know how to apply the data to all calculations for that specific consumer?
5. Itemization of the Debt
This may also change some fields required flowing into your system from your clients, as well as out of your system to create the Validation Notice.
In addition to the amount of the debt on the itemization date and the current amount due, you must also list the interest, fees, payments, and credits that have been applied to the debt since the itemization date. Also, don’t forget that all fields are required, but with the proposed rule, an agency is legally safe to list $0.00 if applicable.
Other fields associated with the Itemization
- Creditor’s Name
- Debtor Account Number
- Name of Current Creditor (if different from the creditor at the itemization date)
Given the fact that each of these data fields could change between the Itemization Date and the Current Date, you may need additional fields in your system and additional fields to pass to your vendors.
The changes are numerous, and they are coming.
Luckily there is time to think through the changes and organize your plans between systems, your clients and your vendors. It will be helpful to get prepared now and start the conversations needed.
DAKCS is Making Plans
Modifications are being made that will be required once the Proposed Rule is final; however, it’s important that we hear from you on how we can help you prepare.
As a customer, you have the ability to join our DAKCS LinkedIn User Group and ask questions about the Proposed Rule, about your DAKCS system or providing ideas as to how you are planning on implementing changes.
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