On October 4, 2017, the CFPB issued an interim final rule amending the provisions of Regulation X mortgage servicing rules, issued August 4, 2016 (“2016 Servicing Rule”), that specify the timing for servicers to provide subsequent written early intervention notice to borrowers who have invoked their cease communication rights under the Fair Debt Collection Practices Act (“FDCPA”). The interim final rule expands the timeframe within which a servicer, which is subject to the FDCPA, is required to provide the early intervention notice by 10 days. This rule will take effect on October 19, 2017, which is the same date as the portion of 2016 Servicing Rule it is amending is scheduled to become effective. As this is an interim final rule, comments can be submitted no later than 30 days from the date it is published in the Federal Register.
This interim final rule addresses a concern brought by the servicing industry as a result of the interplay between the timing provisions in sections 1024.39(b) and (d) of Regulation X, amended by the 2016 Servicing Rule.
Specifically, section 1024.39(b), of the 2016 Servicing Rule, says that a servicer must provide the written early intervention notice no more than 180 days after the servicer has previously provided the notice if the borrower remains delinquent and is 45 days or more delinquent at the end of the 180-day period. Section 1024.39(d) generally provides a partial exemption from the early intervention requirements for servicers that are subject to the FDCPA with respect to borrowers who have invoked their cease communication rights pursuant to the FDCPA. Nevertheless, section 1024.39(d)(3) requires servicers to provide a modified written early intervention notice to those borrowers under certain circumstances. However, section 1024.39(d)(3)(iii) prohibits a servicer from providing the modified notice more than once during any 180-day period. Thus, in circumstances were the servicer is subject to section 1024.39(d)(3)(iii), the interplay with timing requirements in 1024.39(b), could be interpreted to require the servicer to comply within one day, after the end of the 180-day period, with the subsequent written early intervention notice, irrespective of whether that day falls on a Saturday, Sunday or public holiday.
The interim final rule amends section 1024.39(d)(3)(iii) to provide that if a borrower, who invoked cease communication right under the FDCPA, is 45 days or more delinquent at the end of any 180-day period after the servicer has provided a written early intervention modified notice, the servicer must provide the subsequent written notice no later than 190 days after the provision of the prior written notice. In effect, the interim final rule provides servicers with a 10-day window to provide the subsequent notice at the end of the 180-day period.
Servicer subject to the FDCPA should revise their FDCPA and servicing compliance policies to take advantage of this interim final rule amendment. Servicers should finalize these revisions once the rule is finalized.
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