Section 1692a(3) defines a consumer as any natural person obligated or allegedly obligated to pay a consumer debt. The final debt collection rule interprets a consumer’s definition to include deceased natural consumers. Looking towards a November 30th effective date, here are some key items that may require adjustments to your policies and procedures.
Initial Skip Traces. Because the Rule now addresses communications regarding dead consumers, it’s important to review skip trace policies and ensure policies are in place that will provide the debt collector with ample information as to the deceased consumer’s estate. Therefore, collection agencies will want to examine their skip trace policies and procedures to ascertain whether they adequately identify estates and the representatives of those estates wherever possible. According to the CFPB, acceptable means for identifying estates would include searching public records and using location information communications.
Location Information. The Rule will allow debt collectors to seek location information concerning persons authorized to act on behalf of the deceased consumer’s estate. While neither the FDCPA nor the Rule allows the debt collector to disclose the debt, the Rule’s Official Commentary provides directed guidance on what content is acceptable in location information communications. Specific to deceased consumers, the Comments indicate a debt collector may state: “that the debt collector is seeking to identify and locate the person who is authorized to act on behalf of the deceased consumer’s estate” or “that the debt collector is seeking to identify and locate the person handling the financial affairs of the deceased consumer.” See Comment 10(b)(2)-1. Collection agencies should consider incorporating this language into their skip tracing and location inquiries. While not a per se safe harbor, adherence to the comments’ language provides some persuasive authority for compliance.
Debt Validation Notice. For purposes of debt validation, the Rule makes clear that if the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously provided the validation notice to the deceased consumer, the debt collector must provide the debt validation notice to a person authorized to act on behalf of the deceased consumer’s estate. Under the CFPB’s interpretation, this would include executors, administrators, and personal representatives.
The “should know” standard should give debt collectors pause to consider what tools they have at their disposal that would or should allow them to know a consumer is deceased. Debt collectors should establish policies and procedures that address when and to whom a debt validation notice should be sent when the consumer is deceased and processes for identifying estates and the appropriate representative of the estate.
Debt collectors should be mindful of the specificity required when sending validation notices to the representative of a deceased consumer. Comment 34(a)(1)-1 requires that the debt collector identifies by name the person who is authorized to act on behalf of the deceased person. It is not enough to simply address the debt validation to the “Estate of John Smith.” Instead, the debt collector will need to identify the specific person authorized to act on behalf of the deceased consumer’s estate and, where the validation notice has not previously been provided, provide it addressed to the appropriate representative.
Permissive Parties for Communication. For all other communications and consistent with this expansive interpretation of who is a consumer, the Rules likewise include as permissive third parties for communication the deceased consumer’s spouse, parent (if the consumer is a minor), legal guardian, executor or administrator, and confirmed successor in interest (as defined Regulation X). Moreover, the Comments clarify that the terms “executor” and “administrator” include less formal personal representatives. See Comment 6(a)(4)-1. “Persons with such authority may include personal representatives under the informal probate and summary administration procedures…, persons who sign declarations or affidavits to effectuate the transfer of estate assets, and persons who dispose of the deceased consumer’s financial assets or other assets of monetary value extrajudicially.” Collection agencies should be mindful of this clarification and should begin reviewing their policies, procedures, and scripts to evaluate whether they are sufficiently robust to adequately identify such parties.
Because the Rule takes a more expansive view of what defines a consumer, collection agencies should begin reviewing their policies, procedures, scripts, and letter contents to ensure they are properly communicating with estates’ appropriate representatives. Skip tracing and location contacts should be updated to identify deceased consumers and those authorized to act on behalf of the deceased consumer’s estate. Debt validation notices should be similarly updated to send debt validation notices to the appropriate named representative of the estate. And finally, policies and procedures should be updated to identify the appropriate third parties for further communications concerning the debt when the consumer is deceased.
Caren Enloe leads Smith Debnam’ s consumer financial services litigation and compliance group. In her practice, she defends consumer financial service providers and members of the collection industry in state and federal court, as well as in regulatory matters involving a variety of consumer protection laws. Caren also advises fintech companies, law firms, and collection agencies regarding an array of consumer finance issues. An active writer and speaker, Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services Committee. She is also a member of the Defense Bar for the National Creditors Bar Association, the North Carolina State Chair for ACA International’s Member Attorney Program and a member of the Bank Counsel Committee of the North Carolina Bankers Association. Most recently, she was elected to the Governing Committee for the Conference on Consumer Finance Law. In 2018, Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor, a national trade publication. Caren oversees a blog titled: Consumer Financial Services Litigation and Compliance dedicated to consumer financial services and has been published in a number of publications including the Journal of Taxation and Regulation of Financial Institutions, California State Bar Business Law News, Banking and Financial Services Policy Report and Carolina Banker....LEARN MORE