Wouldn't you know that as soon as I put the finishing touches on my regulatory presentation for our Interaction 2012 conference this week, some important news would break.
Oh well, I shouldn't complain since it is potentially very good news for the credit and collections community.
Barney Frank, ranking Member of the House Financial Services Committee, has introduced a bill that would dramatically reduce the risk of violating the Fair Debt Collections Practices Act (FDCPA) when leaving messages on debtors answering machines. HR 4101, entitled the “Fair Debt Collection Practices Clarification Act of 2012,” proposes the Consumer Financial Protection Bureau (CFPB) draft rules that if followed would protect creditors and their collection agencies from lawsuits arising from so-called "Foti" violations.
Foti refers to a 2006 FDCPA lawsuit against a large collection agency which found that when leaving a message on a debtors answering machine, the collector must disclose that it concerns an attempt to collect a debt. Unfortunately, the FDCPA also prohibits disclosure of such intent to third parties. So to comply with one requirement puts you at risk of violating the other.
Since then, plaintiff lawyers have had a field day using this decision to launch other lawsuits or to demand large settlements for their debtor clients. Frank's bill would remove this Catch 22 in the FDCPA, and with the CFPB writing the rules for how to leave messages, undoubtedly continue to protect consumer privacy rights.
It's too early to get our hopes up for a rapid approval - we are still smarting from the flame out of HR 3035 which attempted to make common sense changes to the Telephone Consumer Protection Act - but it is encouraging to say the least that a congressman with such an important role in overseeing financial services has decided this is worth the inevitable flak he will take for trying to fix a flawed law.
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