Debt Collection Text Messages Not Protected by Bona Fide Error?

Starting in late 2020, the national media and consumer advocates published panicked warnings about debt collectors flooding consumers with unwanted text messages, emails and messages on social media in attempting to collect debts after implementation of Regulation F:

One of the articles cited above and published by NPR even opens with a following fallacious scenario that would NEVER occur at any professional debt collection agency in the United States today and is clearly prohibited by Regulation F:

“The next time someone tries to friend you on Facebook or follow you on Instagram, it could be a debt collector.”

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CFPB Leadership Won’t Comment on its Own Rules?

Despite these seemingly dire warnings from our most trusted media outlets, the anticipated flood of unwanted electronic debt collection communications has apparently not yet arrived. The reality is that the Regulation F guidance from the CFPB on electronic communications is unnecessarily restrictive and primarily focused on emails, whereas most consumers seek open and secure communications via text messaging or SMS.

Unfortunately, the false media coverage asserting that Regulation F will result in a flood of unwanted debt collection communications has frightened leadership at the CFPB into silence, apparently fearing further negative media reaction by NPR, CBS and others if the CFPB clarifies its own muddled rules on texting. Here once again, CFPB leadership is noticeably absent when needed most. (see also Hunstein: Does CFPB Leadership Lack Courage and Vision?) Where is the bold and decisive leadership at the CFPB that can rise above false media coverage and provide the real protection and guidance that consumers in the United States demand?

Court Holds Text Message not Subject to Bona Fide Error Defense

The lack of practical clarity from the CFPB on the use of text messages for debt collection has directly resulted in an increased caseload for the Federal Courts to determine the rules. In one recent case, a Federal Court held that a debt collection text message was not subject to the bona fide error defense under the Fair Debt Collection Practices Act, writing:

"However, [the debt collector’s] procedure of relying exclusively on [the creditor] – with no internal controls – is not “reasonably adapted to avoid the specific error at issue.” In Owen, the debt collector contracted with the creditor to assign accounts that are “validly due and owing.” Owen, 629 F.3d at 1275. In holding that the debt collector was not entitled to the bona fide error defense, the Eleventh Circuit stated:

[M]ost notably, [the debt collector] has not indicated any internal, error correction procedures to avoid miscalculations of debt amounts, such as interest on past-due interest or extra fees beyond the debtor’s unambiguous written agreement. [The debt collector] has not offered evidence of any training techniques it employs to foster FDCPA compliance. For example, [the debt collector] cited no evidence that it trains its employees to examine principal and interest to avoid compound interest errors, much less any internal procedures to segregate principal and interest to avoid collection errors. . . . In sum, [the debt collector] cited no internal controls it employs to reduce the incidence of improper debt collection. Rather, [the debt collector’s] procedure is to outsource its oversight task to its creditor [], which must report only debts that are ‘validly due and owing.’”

Owen, 629 F.3d at 1276 (internal footnote omitted). The same is true here. [Defendant debt collector], like the debt collector in Owen, “cited no internal controls it employs to reduce the incidence of improper debt collection,” choosing instead to outsource its entire oversight operation to its creditor, [debt buyer]. Carter v. Capital Link Management 21-cv-00088 (N.D. AL 2022)."

The above excerpt from the July 12, 2022 Court decision in Carter details the present expectations of that Court for a debt collector to establish a bona fide error defense when sending text messages.

The Carter case perfectly demonstrates the type of detailed practical guidance that the CFPB could provide to debt collectors such as specific procedures with examples for communicating with consumers via text message. Unfortunately, the CFPB guidance on electronic communications to date through Regulation F has primary focused on avoiding third party disclosures when using email, a harm that is rarely (if ever) asserted. Further, the CFPB’s tortured guidance on how a debt collector may issue the validation notice by electronic means is so convoluted that it is impossible to implement in most every instance.

It is further perplexing that the CFPB chooses to spend considerable taxpayer resources on issuing advisory opinions on certain issues while it is silent on others. For instance, on June 30, 2022, the CFPB issued a 10 page advisory opinion reiterating its position on convenience fees that it had previously published on August 2, 2017. FDCPA Advisory Opinion; Pay-to-Pay Fees (consumerfinance.gov)

The 2022 advisory opinion above is not materially different from the CFPB published 2017 opinion on the exact same topic. Why would be CFPB choose to reiterate its position on a long ago settled concern such as convenience fees when issues involving debt collectors using text messages and letter vendors remain unsettled? Unfortunately, in the absence of relevant guidance from the CFPB, we can expect the Federal Courts to fill the void and continue to define the procedures for how debt collectors may communicate via text with consumers.

See the complete Order in Carter v. Capital Link Management here.