CFPB decompresses the model validation notice in detail …

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Last week, the Consumer Financial Protection Bureau released two new “compliance aids” to help the accounts receivable management industry provide validation information, including debt details, for the next date. entry into force of the debt collection rule on November 30.

To note: These two compliance aids have been expressly published in accordance with the Compliance Aids Policy Statement, which states that “the office does not intend to use compliance aids to make decisions that are binding on regulated entities”, but rather to “present the requirements of existing rules and laws in a useful way for compliance professionals, other industry stakeholders and the public. ”Compliance aids“ may not be the answer to all situations ”and entities can make their own business decisions regarding compliance, including through methods “not specifically addressed in a compliance aid.

In summary, regulated entities are not required to comply with compliance aids themselves. Regulated entities are only required to comply with the underlying rules and statutes. “

One of the new compliance aids released by the bureau, “Debt Collection Rule: Model Validation Notice Detail Table Disclosure,” includes a discussion of the detail table and detail dates. allowed, as well as examples of detail tables that would conform to the form requirements necessary to preserve the safe harbor for a debt collector using the Pattern Validation Notice (MVN).

“Specifically, the rule requires debt collectors to include on the posting notice both the current amount of debt and certain information about the debt on a particular date called a ‘detail date’,” the office said in the new compliance aid. “Most of this mandatory information appears on the template validation notice in tabular form.”

The Office’s MVN Retail Compliance Help provides an overview of the validation information contained in the table that appears on the MVN, which the office calls the “detail table.” In addition, it illustrates the steps that a debt collector may take to complete the detail table, as well as examples showing how a debt collector can complete the detail table for different types of debt, including credit card debt, medical debt, and multiple debt.

According to the Compliance Aid, a debt collector using the MVN may—But is not obliged to — present the distribution table according to the following four stages:

1. Select the detail date.
2. Determine the amount of debt on the date of the breakdown.
3. Determine the itemized amounts since the itemization date.
4. Determine the current amount of debt.

Interestingly, the compliance aid makes it clear that when a component of a debt has accumulated after the enumeration date but does not fall into the categories of “interest”, “charges” or ” payments and credits ”, a debt collector does not need to itemize this component of the debt.

See example 1 starting on page 12 and the conclusion of this example on page 15, which says: “Due to the circumstances … the debt collector did not include in the amount of the receivable on the settlement date a charge that the consumer had contested. with the original creditor, which the original creditor verified after the detail date (here, the charge date), the debt collector did not include this amount in the detailed amounts but included the amount in the current amount of debt. “

In this scenario, the items in the allocation table do not match the “total debt now amount” that appears in the last row of the allocation table.

The office specifies on page 10 that “[t]there may be circumstances in which an amount cannot be accurately categorized as interest or charges, payment or credit. In such a case, a collection agent who accurately details only interest, charges, payments and credits complies with the Rule. even if there are amounts included in the disclosure of “current debt amount” (step 4) that are not included in the debt detail.(Emphasis added.)

The Compliance Aid notes, however, that a debt collector may choose to “add a field to the breakdown for amounts that cannot be accurately characterized as an itemized amount, as long as the amount is described with precision and not combined with the detailed amounts. “But if this amended validation notice” is not substantially similar to the validation notice template, then the Safe Harbor does not apply to the entire validation notice. ”See note 10 on pages 10-11.

Likewise, Reg F “does not require that the amount of debt on the detail date, plus or minus the itemized amounts, to be equal to the” current amount of debt “, even though the debt collector uses the debit table. detail.

The compliance aid also makes it clear that Reg F “does not define interest, charges, payments or credits for the purpose of defining itemized amounts”.

As a reminder, here are some highlights of Reg F and MVN validation information requirements:

  • The CFPB final debt collection rule imposes new validation notice requirements, which will be codified in 12 CFR 1006.34.
  • The final rule provides, in section 1006.34 (d) (2), a safe harbor for debt collectors who use the MVN, which will be codified at 12 CFR 1006 Annex B, Model form B-1 (“Model de form for the validation notice ”).
  • Debt collectors who use the MVN or a “substantially similar form” as permitted by section 1006.34 (D) (2) (iii) will fall under the Safe Harbor protections, although the contours of the standard “essentially Similar ”will likely be subject to litigation for those who choose to make changes to the validation notice template not expressly addressed in the final rule.

The “substantially similar” standard as discussed in the rule (including in comment 34 (d) (2) (iii) -1 allows modifications to the MVN “provided that the form remains substantially similar in substance, clarity and meaningful sequence. ” (I underline.)

The new compliance aid includes a few other notes related to the use of MVN by debt collectors and detail table disclosures:

  • Since the use of the MVN is not required, a debt collector can provide the validation information using a form that is not substantially similar to MVN, provided it otherwise complies with the requirements of the Act and Reg F.
  • An exclusive validation notice (i.e. a non-MVN validation notice) must still provide all validation information required by Reg F in section 1006.34 (c), but a debt collector who uses such a notice born safe harbor for the “information and form” requirements of section 1006.34 (c) (referred to in the compliance help as the “content and format” requirements of the MVN).
  • Since the compliance aid assumes the use of the MVN, it assumes that the detail will be disclosed in the tabular format defined on the MVN. In the new compliance aid, the office calls this table the “enumeration table”.
  • The concepts discussed in the compliance help will apply more generally, for example, for debt collectors using a similar detail table even if they do not use the MVN.

Translation of the model validation notice and FAQ

In addition to advice on the validation notice, the office also recently published a Spanish translation of the validation notice template.

The office also added a new section to Frequently Asked Questions (FAQs) on the Debt Collection Rule. The new FAQs cover frequently asked questions about, among other things, the use of the validation notice template and the special validation information rule for certain residential mortgage debts.

The Spanish translation, FAQs and classification table documents are available on the CFPB website here.

Visit ACA International’s regularly updated Reg F Resource Center and ACA How: Reg F Implementation for more ACA resources and education on Reg F. A Hot Topics Seminar, Reg F: Ask Me Anything, will be held on November 9 to get your questions answered by November 30. As part of the ACA Fall Forum, the exhibit hall will feature Reg F table discussions, where attendees can chat with their colleagues on various Reg F topics.

If you can’t attend the Fall Forum in person, registration is now open for the Reg F Listening Room, where you can access seven sessions featured in a live stream on November 4-5.

To receive notifications about ACA content, including member alerts, upcoming events and new products.send ALERTS to 96997.


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