Is the CFPB’s Proposed Validation End Date a Wolf in Sheep’s Clothing?

July 30, 2019

Attorney and industry advocate Joann Needleman discusses what the proposed Validation End Date could really mean in the Proposed Rule. 

In the Notice of Proposed Rule (NPR), the Consumer Financial Protection Bureau (CFPB or Bureau) attempts to provide some clarity around the debt collector’s calculation and disclosure of the validation end date. The validation end date is the date certain on which a consumer’s validation rights expire.

The newly proposed format Model B-3 Form for Validation Notice requires a debt collector to disclose an actual date certain. § 1006.34(b)(5) provides the following:

The Validation Period means the period starting on the date that a debt collector provides the validation information described in paragraph (c) of this section and ending 30 days after the consumer receives or is assumed to receive the validation information.

For purposes of determining the end of the validation period, the debt collector may assume that a consumer receives the validation information on any date that is at least five days (excluding legal public holidays, Saturdays, and Sundays) after the debt collector provides it.

Download Sample_ValidationNotice

In the section-by-section analysis, the CFPB acknowledges that debt collectors may be unsure how to reliably determine when a consumer has received the validation information. The CFPB also recognizes that many debt collectors will honor disputes and requests for validation outside the 30 day period.

It is for this reason the CFPB says its proposal “will not prohibit a debt collector from honoring a consumer’s request to exercise verification rights after the date certain that appears in the validation notice.”

While the Bureau seems to think that providing a validation end date will be helpful to both consumers and debt collectors, there are a few important considerations that it overlooked.

What does the consumer understand about the validation end date?

The model validation notice advises the consumer that they have until a certain date to dispute all or part of the debt. If the consumer is sending a written dispute by mail, is the validation end date the date that the debt collector receives the dispute or the date that the dispute is post-marked?The rule and analysis are not clear.

Take the following for example:

Suppose that the validation end date is June 15th and the consumer puts the dispute in the mail on June 14th.  On June 16th the debt collector has received nothing from the consumer and starts or continues collection attempts. On the 17th, the debt collector receives the consumer’s dispute.

Has the debt collector violated § 1692g(b)?
The consumer believes to have disputed timely. The debt collector had no notice of the dispute on the validation end date. 

Guidance and model language which clarifies the date the actual dispute is received in order to comply with the validation end date is critical.

Electronic communication poses some risk.

While the debt collection industry welcomes the idea of electronic communications with consumers, those communication channels pose new types of risk.

First, the CFPB has not proposed any type of mailbox rule for electronic communication. The current proposal infers a mailbox-type rule by suggesting that a debt collector can assume that a consumer has received the validation upon mailing, barring notification of any return mail.

In the situation of email and text, unless a return notification is provided, an email may be blocked by a firewall or put into the spam folder, while a text can easily be blocked.

In both situations, the debt collector may have no knowledge that the communication was not received. The same could be true for communications if sent by consumers. There may be instances where an agency’s firewall will not permit a certain domain name. Confirmation of when a communication is sent and received are critical elements for calculating and determining the start and finish of the validation period.

The Fair Debt Collections Practices Act (FDCPA) only requires proof of receipt upon notice of a cease and desist. However, compliance with this rule would require some actual knowledge. Agencies will need to work with their IT departments and third-party software providers in order to ensure that confirmation of receipt can be captured.

Is putting an end date a false or deceptive communication if an agency accepts disputes after the end date?

Finally, while the industry has been willing (as they should be) to accept disputes past the validation period or validation end date, is putting a deadline in the validation notice, and then not abiding by it, a false or deceptive statement? A creative plaintiff’s attorneys may think so.

Remember, the FDCPA says that if a consumer does not dispute the debt, then the debt collector has the right to assume the debt is valid. As much as the Bureau says that its proposal is flexible enough to allow debt collectors to accept disputes after the validation period, the plain meaning of the statute and current case law which interpret false, deceptive and misleading communications suggests otherwise.

Furthermore, will it be enough for the debt collector to include additional language in the validation notice advising the consumer that the end date is really not the end date, and that a consumer can dispute at any time? This will more likely cause more confusion for the consumer.

The CFPB would be wise, and industry should support, additional clarification language which adequately informs the consumer that disputes after the validation end date will be honored, while at the same time not punishing an agency for giving the consumer that right. 

The conversation continues…

2019 Joann Needleman Headshot

Attorney and industry advocate Joann Needleman, guest compliance thought leader, continues to bring her experience and insight as a navigator and strategist to assist in the regulatory changes the debt collection industry is facing today.

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