North Carolina Bankers Association - Carolina Banker Magazine, Winter 2021

Joseph Grenny, the author of “Crucial Conversations,” once said “[a]t the core of every successful conversation lies the free flow of relevant information.” Never has that statement been truer. With new debt collection rules posed to take effect, now is the perfect time for banks, small and large alike, to be having crucial conversations with their third-party vendors to ensure they are taking effective measures to comply with the new rules and to ensure the expectations of both parties are aligned. On November 30, 2021, the new debt collection rule (Regu- lation F) will take effect — 12 C.F.R. Part 1006. Almost ten years in the making, Regulation F is not directly applicable to banks, but does have indirect impacts. Regulation F will require an additional flow of information between banks and their debt collection vendors, including law firms. Banks should be asking their vendors questions about their imple- mentation and what impacts it will have on their collection of delinquent consumer accounts. How will Regulation F impact what information the bank needs to provide to its third-party vendors at the outset of collection? Regulation F requires debt collectors send a validation notice at the outset of collection. Under Regulation F, the debt collector must identify an “itemization date” and provide an itemization of the debt from that itemization date through the date of the communication. It is therefore imperative that the bank and the debt collector communicate to determine which “itemization date” they will use and what documentation will be necessary to itemize the balance from that date forward. Regulation F requires debt collectors choose between one of five specified reference dates as their “itemization date:” • the last statement date, which is the date of the last peri- odic statement or written account statement or invoice provided to the consumer by the creditor; • the charge-off date, which is the date the creditor charged off the account; • the last payment date, which is the date the last payment was applied to the debt; • the transaction date, which is the date of the transaction that gave rise to the debt; or • the judgment date, which is the date of a final court judgment that determines the amount of the debt owed by the consumer. 12 C.F.R. 1006.34(b)(3) (effective November 30, 2021). Banks should be having conversations with their third-party vendors regarding selection of an itemization date to ensure the debt collector has a clear understanding of how the bank arrives at the balance. Banks should also be making inquiries regarding the format of the debt collector’s validation notice to ensure they are using third-party vendors who comply with consumer finance laws and are properly implementing the Rule. Do your third-party vendors intend to utilize electronic communications? One of the hallmarks of Regulation F is its adaptation to more modern communication channels within the limitations of the Fair Debt Collection Practices Act. The Rule provides for the use of email and text communications and provides specific procedures which, if followed, provide the debt collector with a safe harbor with respect to electronic communications and unintentional third-party electronic communications. Caren D. Enloe Partner, Smith Debnam (919) 250-2125 CRUCIIAL CONVERSATIONS 38 Carolina Banker | Winter 2021 FEATURE CONTENT