Two major changes are set to influence payment processing in the Accounts Receivable Management (ARM) industry in 2021. To ensure that you are prepared for these upcoming changes, we have outlined what these trends are, what to expect, and what this means for your business.
New CFPB Rule:
The Consumer Financial Protection Bureau (CFPB) has outlined a new debt collection rule – known as Regulation F (or “Reg F”) – which serves to update the Fair Debt Collection Practices Act (FDCPA). This new rule will, for the first time, provide safe harbor for collection agencies to send electronic communications via voice mail, email, and text messages.
Under Reg F, collectors are barred from harassing debtors via phone, text, and email, adding modern communication tools to the traditional phone call as regulated practices. Debt collectors are also required to offer consumers “a reasonable and simple method” to opt-out of communications sent to a specific email address or phone number. Furthermore, if a debt collector uses electronic communications to reach a consumer, the consumer can use the same technology to submit a “cease communication” request or notify the debt collector that they refuse to pay the debt.
As this is the first time that such guidance on electronic communications has been released, it is extremely important to stay informed and use these electronic communication tools in a manner that is compliant with the new rules. All in all, this is easier to control when using the right provider for texts, emails, chats, and any other consumer-facing information. Remember that if account information is provided to the consumer, the format is considered a “communication” so your web portal and IVR may be covered as well. While there are varying degrees of services provided to meet the new requirements (for example, some solutions have two-way texts, while some do not), you’ll need the best, most inclusive communication tools to ensure that all the requirements set within Reg F are met. Payscout’s proprietary payment platform offers access to a multitude of peripheral inputs – including emailing, SMS messaging, chat messages, and debtor negotiation portals – while maintaining full compliance with Reg F. If your payment platform is not equipped to fully support the updated forms of communications, be sure to contact email@example.com to take advantage of this major change in 2021.
Up until now, it’s been the case that plaintiffs’ attorneys would actively seek to entrap collection agencies for violations of FDCPA protocols. Now that the FDCPA is effectively being “modernized” to address new forms of electronic communications and provide safe harbor language, these attorneys will look elsewhere for opportunities to claim Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Since safe harbors are now in place for new forms of communication, plaintiffs’ attorneys will be looking for new”violations” to attack. In particular, one area that will likely see enhanced attention is Convenience Fees.
With the expected focus on Convenience Fees, it is more important than ever to ensure that your Convenience Fee solution is fully compliant. If you are looking for a compliant solution, Payscout’s 360˚ Fee-Free solution is fully compliant with the Card-Brand rules, FDCPA, and state law, allowing you to eliminate your risk of violating compliance requirements. This is often not the case, as there are prominent payment processing providers in the ARM space today promoting Convenience Fee solutions that are not compliant with Card-Brand rules, thus putting you at risk for lawsuits and severe penalties. One of the easiest ways for you to ensure that your Convenience Fee solution is compliant is to ask your payment provider if the convenience fee is applied separately or as part of the principal transaction. Visa explicitly requires the fee to be included as part of the original transaction, so any provider that charges the convenience fee as a separate transaction is therefore not offering a compliant solution.
What does this mean for your business?
It is crucial to monitor (or select a payment provider that monitors) changes in the ARM space in order to stay informed. For instance, the CFPB has in fact just released the second part of their debt collection rules, which we are reviewing and will be providing further guidance on.
With the upcoming change in administration, we can expect even more updates for the ARM industry to come, and taking all these changes into account, is it it is more important than ever for those in the ARM space to audit their technology to ensure that they are fully prepared for the upcoming changes. The new Reg F provides safe harbors for collection agencies to implement more methods of communication, which means that it is time for you to implement the best-in-market tools for SMS, emailing, chat, and debtor negotiation. With these new safe harbors in place, plaintiff’s attorneys will likely be focusing more on Convenience Fee compliance, so it is critical to act now to ensure that your convenience fee solution is in full compliance with the Card-Brand rules, FDCPA, and state law.
To learn more about how you can be better prepared for the upcoming changes next year, contact our team at firstname.lastname@example.org.