On January 19, 2023, LiveVox welcomed the CFPB’s Debt Collections Sr. Program Manager, Gandhi Eswaramoorthy, to a roundtable discussion about the use of SMS in Collections. This discussion took place just over a year since the Bureau’s Reg. F rules went into effect. 

LiveVox General Counsel Mark Mallah and leading industry attorney Joann Needleman were present to ask key questions to Gandhi. His answers provided meaningful insight into the CFPB’s stance on using texting for collections.

The discussion also provided an in-depth analysis from Mark and Joann about how collectors might interpret and respond operationally to the Bureau’s stance and framed the issue in a wider legal and industry context. 

For the full picture, you can watch a recording of the discussion here. 

For immediate insight, we’ve provided a summarized transcript of Gandhi’s answers to the key questions below.

What is the CFPB’s position on sending the model validation notice via SMS?

Gandhi:

Regulation F, which has been in effect for over a year, does not prohibit debt collectors from sending validation notices through text. However, the regulation does not provide specific instructions or safe harbors for sending validation notices through SMS. When sending required disclosures, such as a validation notice through electronic channels like text, it must comply with certain provisions of the rule.

The most important provision is that the debt collector must do so in a manner that is reasonably expected to provide actual notice and in a format that the consumer can store and access later at any time they prefer. In addition, any debt collector who sends the validation notice electronically such as via an SMS should also comply with the e-sign consent requirements.

Another last point I want to emphasize is that Regulation F provides a narrow scope for using text to deliver messages to consumers (including validation). For example, if a debt collector acquires a telephone number they want to text, they have to adhere to certain procedures laid out in the rule to do so:

• The phone number is one that the customer used to text the debt collector in the past 
• The debt collector uses a reassigned number database (e.g. the FCC) to verify that the number has not been reassigned within the last 60 days. 
• The consumer has given direct consent to the debt collector for texting and reconfirms that consent within the last 60 days or the debt collector uses a reassigned number database to confirm that the number has not been assigned within the last 60 days . 

If the debt collector follows these procedures, they receive a safe harbor from the bonafide error of disclosing to a third party, for instance.

What is the CFPB doing to work with the carriers to allow businesses to send SMS messages related to debt collection activity?

Gandhi:

The Bureau is continually monitoring the issue of text blocking by carriers. As part of our market monitoring activity, we talk to parties from across the industry including card-issuing banks and debt collectors. While the Bureau may not have jurisdiction to work with carriers to solve the problem, understanding the problem and the overlap with regulatory provisions will be helpful in evaluating potential solutions in the future. 

Debt collectors often cite a lack of standard registration processes and unclear blocking logic used by carriers. Consumer complaints about debt collection texts and the volume of debt collection texts also contribute to the problem. 

However, some credit card issuing banks have solved the issue by using shortcodes and sharing campaign details with carriers (including text scripts and the shortcodes they plan to use). 

The FCC currently has rulemaking underway for targeting and eliminating unwanted texts. If finalized, this proposal would require carriers to provide reasonable analytics as a basis for blocking texts, have a customer service desk for impacted clients to call and resolve issues, and provide caller ID authentication standards for texting.

When sending the Model Validation Notice through a link in an SMS message, how are those communications counted? Is it one or two communications, and how does that affect the necessary disclosures?

Gandhi:

Regulation F did not specify how to determine if a series of text messages or a text message with a linked document constitutes one or multiple communications, particularly for the purpose of mini-Miranda disclosures. 

The Bureau believes that a highly prescriptive approach attempting to define whether a communication is an initial communication or a subsequent communication, particularly when it comes to multimedia, such as phone, letter, email, text, and so forth, is difficult to define. For example, it’s hard to say when the first text is an initial communication and when a subsequent text begins. 

The Bureau also notes that it’s similarly difficult to define when a web chat conversation starts and ends, as it’s a back-and-forth conversation that’s similar to a phone conversation. 

The final rule did not provide instructions or procedures to delineate whether one text message is the initial communication and the other is a subsequent one. In a text environment, it is hard to say in a blanket sense what is considered the communication in the first instance versus follow-ups.

To what extent will the CFPB consider UDAAP principles when a debt collector communicates with a consumer by email or text without consent?

Gandhi:

As mentioned before, the general prohibition against any 

conduct that harasses, oppresses, or abuses any person in connection with debt collection activity, applies to new channels of communication such as email and text. 

This means that even though the 7-in-7 limit that applies to telephone calls does not apply to email or text, debt collectors cannot use these channels at will. 

For example, if a debt collector sends too many texts to a consumer who is not responding, it could be considered a violation. Similarly, if a debt collector uses multiple channels of communication, such as phone calls, emails, and texts, all in a short period of time, it could also be considered a violation. 

It is important to note that the general prohibition applies to all the other provisions such as time and place, for example, if a consumer expresses a preference for no cell phone use during the weekends, then the debt collector should not use that phone number for texting during that weekend. It will be evaluated in the same way for email and text as it would be for any other communication channel.

Watch a full recording of the roundtable here.