“New Fangled Communications” using and “Old-Fangled” Statute
The Consumer Financial Protection Bureau’s (CFPB or Bureau) effort to address electronic communication in the Notice of Proposed Rulemaking (NPR) must be applauded.
It is 2019 and when was the last time you wrote a letter, licked a stamped, or even wrote a check to pay a bill? We are moving into a new age and the ways of contacting a consumer need to evolve accordingly.
The Fair Debt Collection Practices Act (FDCPA or Act) was enacted in 1977. At the time it was enacted, the statute spoke to communicating with consumers using mail and telegrams. Unfortunately for the CFPB, the NPR can only go as far as the text of the Act.
The recent 7th Circuit case of Lavallee v. Med-1 Solutions Inc. highlights the difficulties and the workability the NPR will have within the framework of the FDCPA when it comes to electronic delivery of disclosures.
What does Lavallee Say?
Med-1, as debt collector, attempted to collect two medical bills owed by Lavallee. On two separate occasions, Med-1 sent emails to Lavallee about her debts. The email messages stated that “Med-1 Solutions has sent you a secure message” and featured an embedded hyperlink inviting Lavallee to click onto the “View Secure Package” button which would have navigated her to additional screens.
Ultimately, Lavellee would have reached a screen with a pdf where she would have been able to view the validations notices as required by § 1692g of the FDCPA.
Lavellee never clicked onto the hyperlink and never opened the PDF files that contained the validation notices. Several months later, Lavellee called Med-1 regarding an unrelated matter and learned for the first time about the debts Med-1 was previously attempted to collect. Med-1 never followed up with another set of validations notices after that phone call. Lavellee sued claiming that she never received the required validation notice.
The Circuit Court framed the issue in the case as follows:
The court disagreed because the emails did not “convey information regarding the debt” or imply the existence of a debt. The Court found at a minimum, the emails were a “digital pathway to access the required information.”
There is no requirement that a Validation Notice be received
Section § 1692g(a) states that “within five days after initial communication with a consumer… a debt collector shall, … send the consumer a written notice containing the following…”
There is no requirement under the FDCPA that the debt collector proves that a consumer received the validation notice or has even read the notice. Even if the mail is returned, an argument can be made that the debt collector still complied with the requirements of § 1692g. Under those circumstances, however, a debt collector is on notice by the return mail that the notice was not “sent” and the consumer was not given their validation rights.
To proceed with collection efforts, under those circumstances, would certainly be unfair and unconscionable. However, if the mail is not returned, a debt collector has not only complied with the requirements of 1692g but it is assumed that the consumer has in fact received the validation notice and the information about the debt was conveyed. This is true even if the consumer never receives the notice and never opens the letter.
NPR proposes to allow debt collectors to electronically provide mandated disclosures like the validation notice.
Section 1006.42(c) however, allows debt collectors the option of an alternative procedure of sending electronic disclosures which, among other things, permits the debt collector to place the disclosure in a hyperlink as long as the consumer has not otherwise opted-out of receiving such a hyperlink under the procedures described in § 1006.42(d).
Where the NPR, Lavallee & the FDCPA Collide
Assuming the consumer has not opted out of receiving electronic disclosures by hyperlink, the Bureau’s proposal to use a hyperlink seems to contradict the decision in Lavallee.
Unlike § 1006.42(b), the NPR does not require a debt collector, when using a hyperlink, to identify anything about the nature or source of the communication. Therefore using the hyperlink as proposed in the NPR would be a “digital pathway to access required information”, something the 7th Circuit frowned upon.
Certainly, the CFPB can enhance the information requirements when using a hyperlink to require debt collectors to include more information about the debt. However, a bigger discrepancy is emerging: the heightened requirement inferred by the 7th Circuit and discussed in the NPR that debt collectors must show that a consumer had notice of electronic communication which is non-existent in the FDCPA itself.
Remember in Lavallee, the consumer never clicked on the hyperlink which contained the validation notice. That was one reason the Court found that the initial communication was the phone call Lavallee made several months later to Med-1. However, had Lavallee been sent the validation notice by mail, that would have been enough to comply with the FDCPA, regardless of whether she opened the letter or even received it.
The NPR, on the other hand, mandates that if disclosures are going to be sent electronically, the debt collector must do so in a “manner that is reasonably expected to provide actual notice”. §1006.42(a)(1) [Emphasis added].
7th Circuit and CFPB not aligned
The 7th Circuit and the CFPB are not aligned on this issue. Is a reasonable expectation of “actual notice” enough to be a communication in the eyes of a court? The 7th Circuit did not think so in the Lavellee case.
Debt collectors may be optimistic about the opportunities to use electronic communications. However, it cannot be forgotten that the FDCPA is not a flexible or a workable statute. Caution must be used when implementing new methods of communications from this archaic law.
When using electronic communication, debt collectors will need to balance the mandated requirements of the FDCPA while at the same time ensure that consumer has received the communication.
In the days of mail and telephone calls, this was not necessarily a concern not did it have to be. As the industry moves onto the electronic age, whether the communication was actually conveyed will be the focus.
Stay at the forefront of the compliance conversation. For DAKCS customers specifically, you may ask questions and post industry peer content via our Linkedin DAKCS Software Systems User Group.
- Human Intervention in the Absence of FCC Guidance: Timing is everything
- Click-to-Call is a way to reach consumers with human intervention
- Customers’ Concerns About Obtaining Consent
- What Do the Comments to the NPR Tell Us About the Final Rule
- DAKCS Software Submits Comments for CFPB Debt Collection Proposed Rule