By Tricia Ann-Olson Zachary
Many years ago I wrote an article for Collector magazine about branding in the accounts receivable management (ARM) industry. The article included a discussion of the prevalence of descriptive trade names within the ARM industry and the benefit of creating a distinct brand that begins with a single trade name. While these considerations are still in play today, one thing has changed: the law.
From November 30, 2021, but potentially until January 29, 2022, the rule implemented by the Consumer Financial Protection Bureau which revises Regulation F, 12 CFR part 1006, will come into force. The debt collection rule provides guidance and clarification, particularly in the area of communication.
The CFPB has proposed to extend the effective date to January 29, 2022, to give ARM industry stakeholders affected by the pandemic additional time to review and implement the regulation. F. The office did not announce its decision.
When the debt collection rule comes into effect, a significant exception will create a much needed safe harbor in terms of what “disclosure” entails. The CFPB has created a significant exception to the definition of “communication,” which I will discuss in a hot topic webinar on August 5, What’s in a Name? Strengthening your brand with the limited content message exception.
The new debt collection rule defines “attempted communication” as any act aimed at initiating communication or other contact with a person by any means, including by soliciting a response from that person.
A “communication attempt” includes the new definition of a “limited content message”. This message will legally create an exception to a “communication” under the Fair Debt Collection Practices Act.
The “Limited Content Message (LCM is a voice message that includes the following content:
- A request that the consumer responds to the message;
- A business name for the debt collector that does not indicate that the debt collector is in the debt collection business;
- The name or names of one or more natural persons that the consumer can contact to respond to the debt collector; and
- A return phone number.
The significant advantage and relevance of LCM is that it is not interpreted as a “communication” under the FDCPA. LCM allows a debt collector to leave a message to a consumer without communicating, within the meaning of the FDCPA, with anyone other than the consumer.
The LCM exception will eliminate the conflict between meaningful disclosure and unauthorized disclosure by a third party. Heretofore, some courts have held that a message requesting a return call from a consumer is a communication under the FDCPA and therefore must include a statement in accordance with section 807 (11) requiring the disclosure that the ‘appellant tries to collect a debt. However, this requirement increases the likelihood that a third party will know that the message is about debt collection.
Other courts have tried to argue that a simplified message omitting certain information could not qualify as communication. The CFPB assessed the impact of this conflict and recognized that this tension leads to repeated contact and excessive appeals, in response to the jurisdictional disagreement. As a result, the debt collection rule created the LCM exception to reconcile the conflict and more closely follow Congress’ original intent.
However, the debt collection rule requires that the name cannot “indicate that the business is a debt collector”. As part of the section-by-section analysis of the final rule, the CFPB states that “the business name of a debt collector who [indicates] that the debt collector is engaged in debt collection activity is [not allowed within] the obligatory content of a [LCM]… “
It is important to note that if your business name reveals that you are in the debt collection business, contact not be interpreted as an LCM, but would be a “communication”.
As a practitioner whose firm focuses on two distinct practice areas, intellectual property and collections compliance, the part of my practice that guides businesses on copyright and trademark law is challenged by the prevalence overwhelming number of descriptive trade names in the ARM industry.
It is a common desire of any business when it first considers its name because it wants to be identifiable. However, opting for a descriptive name often leads to confusion with other businesses and a lack of identity for potential customers.
With no intention of disrespecting anyone, the “accounts receivable” and “debt collection” industry is full of business names that use these keywords as their primary title.
Due to this new exception, this is an opportunity to consider how to create an identity for your business as a brand, not as a description of services.
A brand name will help your business create a strong source identifier that stands out from other businesses and ensure compliance under the LCM exception.
As the CFPB further stated, “many debt collectors will be able to disclose … doing business under the name (d / b / a) without revealing that they are in the debt collection business.”
Anyone whose business name might not be able to use the LCM exception has likely encountered at least a few occurrences of a misdirected complaint, or received allegations that a credit entry was in error, only to discover that it is a different agency.
Reputation is essential across all industries and the ability to stand out is a critical benefit of establishing a brand, not just a business name, especially using identifiers that don’t get lost in an ocean of descriptions.
There is no better time than now to assess this question to make sure you can use the clarification created by the debt collection rule.
If you want more information, be sure to check out the hot topic What’s in a Name? Strengthen your brand with the Limited Content Message Exception on August 5th.
Zachary is a lawyer with Ovaile Law Group in Edina, Minnesota. She can be reached at firstname.lastname@example.org.