Adopting Validation Notices under the CFPB Proposed Rules
A Closer Look at CFPB Updates – Part 3
In our last blog post, we shared some introductory thoughts on the latest Consumer Financial Protection Bureau (CFPB) proposed rules to amend the Fair Debt Collection Practices Act (FDCPA), which the agency issued on May 7.
If they pass, the rules will affect how both first and third party data furnishers handle credit dispute resolution. Here, we’ll dive deeper into one of the biggest changes associated with the rules.
A New Way to Facilitate Dispute Response
The proposed rules include a requirement for debt collectors to send disclosures to consumers in validation letters that itemize the debt and outline plain language instructions for addressing the collection attempt. Additionally, the proposed validation letters must have a consumer response “tear-off” that the consumer can complete and return. As currently written, the “tear-off” offers three options from which the consumer can select as the reason for dispute: a.) Not My Debt, b.) Amount is Wrong, and c.) Other.
The CFPB rules also add language allowing electronic notification via email and other methods that have been pre-approved by the consumer.
How It Impacts You
Whether you are a first or third-party data furnisher, the consensus is that you will likely face an increase in dispute volume, as the “tear-off” presents consumers with a new way to submit disputes. You’ll need adequate staff and technology resources to handle this influx of disputes, and subsequent dispute responses, in an efficient and cost-effective manner.
Palinode can help data furnishers successfully incorporate the validation notice requirement under the CFPB proposed rules with Sonnet, our automated credit dispute resolution system. Sonnet integrates with both direct and indirect dispute workflows to provide a consolidated view of all your data, making it easier to manage increasing volumes of disputes.
Additionally, using optical character recognition (OCR) technology, Sonnet will be able to process the “tear-off” forms submitted by consumers. It will automatically assign a dispute to both the consumer and the debt, and it will recognize dispute classification, so you won’t have to manually enter consumer responses or organize dispute files. Through automation and logic, Sonnet will efficiently help you investigate and respond to this type of dispute.
Need more info? Request a demo to see how Sonnet can work for your business.