According to the latest debt collection rule from Consumer Financial Protection Bureau (CFPB), debt collectors — which, in some cases, applies to mortgage servicers — now have the green light to communicate with borrowers via social media.
The new rule, which went into effect on November 30, is an update to the Fair Debt Collection Practices Act (FDCPA) and allows debt collectors to reach out to borrowers through social media accounts as well as through email and text messaging.
Mortgage servicers who service loans on someone else’s behalf, like subservicers, and servicers who acquire mortgages already in default, are considered debt collectors under this statute.
But the details surrounding the new debt collection update have left many in the industry wondering if the risks of communicating with borrowers via social media outweigh the potential benefits.
As I recently explained to HousingWire, I see this new rule as a first step to bring the FDCPA from the ‘70s — when the rule was first put in place — into the 21st century.
But while it’s a step forward, it’s still a small step. The CFPB has allowed these new methods of borrower outreach, but how actionable are they really?
Social Media Borrower Outreach: Better in Theory than Practice?
Some think that engaging with borrowers on social media is still too risky. The rule uses subjective language, which has some feeling wary in light of the new administration’s more hard-line regulatory approach.
As Consigliera founder Courtney Thompson put it to HousingWire, “servicers are struggling to digitally communicate with consumers at all,” much less through social media.
And the new rule comes with other challenges, like the new seven-day rule, which prevents debt collectors from calling a consumer more than once in a seven-day period. Our system of record, LoanServ, has already implemented a contract tracking feature to ensure that servicers are accurately tracking their consumer touches in compliance with the new rule.
Even so, I think we’re still a ways off from seeing servicers regularly using social media to reach out to collect from consumers. The key problem lies in the lack of reliable identity verification processes that would enable servicers to be confident they were reaching out to the intended consumer.
As I explained to HousingWire:
You have to be really sure it’s the right person on Instagram, because otherwise you can get in a lot of trouble. Is it worth the risk of trying to collect on a debt, only to end up revealing info that shouldn’t have been revealed?
Until servicers can figure out a reliable way to verify consumer identities through social media, I doubt we’ll see them utilize this method, instead sticking to their tried-and-true phone, text, and email outreach methods.
For more on how Sagent is helping our servicers comply with the latest FDCPA changes, fill out the form below or hit me directly at Matthew.email@example.com with all your compliance questions.