Legality of CFPB collector rule called into question

In its most recent proposed debt collection rules, the Consumer Financial Protection Bureau proposed allowing collectors to contact debtors electronically so long as they complied with the provisions of the Fair Debt Collection Practices Act. A recent federal court ruling has called the validity of that rule into question.

FDCPA is a federal law that governs the actions of third-party debt collectors. The law restricts the means and methods by which collectors can contact debtors. If the FDCPA is violated, a suit may be brought against the collector. Debt collectors may contact debtors via mail, email, or text message. After making contact, debt collectors must also send within five days a written “validation notice” that includes how much is owed, the name of the creditor, and steps to take if the debt is disputed.

The definition of an adequate “validation notice” is at the center of the recent decision.  The bureau’s proposed rules allows emailed notices to include a hyperlink to a website on which the notice is accessible, subject to a series of specific conditions set forth in the proposed rules. In the decision, the Seventh Circuit ruled that the emails sent by a debt collector to the plaintiff containing hyperlinks to a server operated by the debt collector’s sister company on which the plaintiff could access and download the validation notices did not satisfy the FDCPA validation notice requirement. 

The court identified two issues with the emailed follow ups. First, the debt collector in the case sent emails to the debtor that said nothing about a debt or debt collector in the subject line or body of the emails. Secondly, the emails included hyperlinks the debtor was expected to click to reach the validation notices. The court concluded that the validation notices were never sent because the plaintiff never downloaded them.

The Seventh Circuit ruled that the emails were not “communications” under the FDCPA because they did not “at least imply the existence of a debt.” The court further ruled that the emails violated FDCPA because “they did not themselves contain the enumerated disclosures.” FDCPA provides that the validation notice must be “contained in the initial communication” or provided in a written notice “containing” the validation notice that is sent within five days after the initial communication. 

According to the Seventh Circuit, “at best, the emails provided a digital pathway to access the required information” but they did not “contain” such information.