Bureau of Consumer Financial Protection 1700 G Street NW Washington, DC 20552 Dear Madam or Sir: The American Bankers Association (ABA) appreciates the opportunity to comment on the Consumer Financial Protection Bureau’s (Bureau) Supplemental Notice of Proposed Rulemaking for time-barred debt disclosures (SNPR). The supplemental notice amends the Bureau’s proposal to implement the Fair Debt Collection Practices Act (FDCPA), adding specific disclosures for third-party collectors to provide to consumers regarding debt for which the applicable statute of limitations has expired, known as time-barred debt.
I. Summary of Comment The proposal contemplates that time-barred debts can be classified into one of four types, a categorization that ABA disputes, and it proposes a specific disclosure to be provided for each type. The Bureau proposes that if a debt collector “knows or should know” that a debt is time barred, the collector must give the appropriate disclosure orally or in writing in the collector’s initial communication with the debtor, or on the first page of any validation notice. The Bureau also proposes specific guidelines for the timing of the time-barred debt disclosures in instances when the debt becomes time-barred during the collection process or when the collector discovers that the debt is time-barred. Four model forms have been proposed, each corresponding to a specific disclosure, and use of a model form in a validation notice, or use of form’s content in other required communications, provides a safe harbor for the debt collector.
As the Bureau acknowledges, there is no data on the dollar amount of time-barred debt in collection in the United States, but it is a fair assumption that time-barred debt is a minority of delinquent debt. According to the FDIC’s Quarterly Bank Profile, net total charge-offs for 2019 amounted to $52.116 billion. While disturbing anecdotes abound regarding harassment of consumers for decades-old debts, there is no empirical evidence that suggests that time-barred debt is a major component of the debt collection or debt sales market. However, as demonstrated by the Federal Reserve Bank of Philadelphia, restrictions on collections are known to reduce credit access by resulting in lower recovery rates. Thus, any proposal that restricts the ability to collect should carefully consider the impact on consumers overall – not just those subject to debt collection.
ABA supports the Bureau’s objective to provide consumers with actionable information regarding time-barred debts. We understand that the proposal represents the Bureau’s attempt to provide consumers with easy-to-understand, useful information on the consumer’s options for repaying a time-barred debt. However, given the legal complexities involved, we believe that use of the proposed disclosures would constitute providing legal advice as to repayment options and/or the legal consequences of opting not to repay. That is not a proper role for debt collectors, and most importantly, will not benefit consumers.
Attempting to provide consumers with customized time-barred debt disclosures will inevitably raise more questions than they answer. A consumer who receives a disclosure that he or she does not understand is likely to contact the debt collector to ask questions regarding whether the consumer has a continuing obligation to pay the debt or whether the consumer can be sued. A collector, who is being paid to collect the debt, will be challenged to respond to those inquiries on behalf of the creditor. Consumers who receive the Bureau’s proposed disclosures will contact collectors for further information. This puts collectors in the awkward position of trying to explain the disclosures without impacting the collector’s ability to recover the amounts owed. Forcing collectors into this difficult position will ultimately lead to consumer frustration and complaints.
Instead, ABA recommends that the Bureau take responsibility for creating educational resources for consumers regarding time-barred debt and consumer options for addressing such debts, in conjunction with a more general time-barred debt disclosure. This would lead to better, more accurate consumer information than the Bureau’s proposed disclosures, which are unworkable, legally inaccurate, confusing, and likely to increase, not decrease, litigation over time-barred debts. To read more, click here.