Customise Lifeless Client Insurance policies and Procedures | Smith Debnam Narron Drake Saintsing & Myers, LLP

Section 1692a(3) defines a consumer as any natural person who is obligated or allegedly obligated to pay a consumer debt. The final debt collection rule interprets the concept of consumer as including deceased natural consumers. With the November 30th effective date in mind, here are some key points that may require adjustments to your policies and procedures.

Initial jump marks. As the rule now applies to notices relating to deceased consumers, it is important to review skip trace policies and ensure policies are in place that provide the debt collector with comprehensive information about the deceased consumer’s estate. Collection agencies should therefore review their skip-trace policies and procedures to determine if, where possible, they are adequately identifying estates and those estates’ representatives. According to the CFPB, acceptable means of identifying properties would include searching public records and using location information.

location information. The rule will allow collection agencies to obtain location information on individuals authorized to act on behalf of the deceased consumer’s estate. While neither the FDCPA nor the rule allow the collection agency to disclose the debt, the rule’s official commentary provides direct guidance as to what content is acceptable in communicating location information. Specific to deceased consumers, the comments note that a collection agency may state: “that the collection agency is attempting to identify and locate the person authorized to act on behalf of the deceased consumer’s estate” or “that the Collection agency is attempting to identify and locate the person handling the deceased consumer’s financial affairs.” See Comment 10(b)(2)-1. Collection agencies should consider including this language in their skip tracing and location requests. While not a safe haven per se, adherence to the language of the comments provides some compelling force for compliance.

Notice of Debt Validation. For the purposes of debt validation, the rule clarifies that if the collection agency knows or ought to know that the consumer is deceased, and if the collection agency has not previously provided the deceased consumer with the acknowledgment notice, then the collection agency must provide the debt validation notice to an individual who is authorized to act on behalf of the deceased consumer’s estate. As interpreted by the CFPB, this would include executors, administrators and personal representatives.

The “should-know” standard should give debt collectors pause to consider what tools are available to them that would or should allow them to know that a consumer has passed away. Collection agencies should establish policies and procedures that specify when and to whom a debt acknowledgment notice should be sent if the consumer is deceased, as well as procedures for identifying estates and the appropriate representative of the estate.

Collection agencies should note the required specifics when sending acknowledgment notices to a deceased consumer’s representative. Commentary 34(a)(1)-1 requires the debt collector to identify by name the person authorized to act on behalf of the deceased person. Simply directing the debt check to the “John Smith estate” is not enough. Instead, the debt collector must identify the specific person authorized to act on behalf of the deceased consumer’s estate and, if the acknowledgment notice has not been previously provided, deliver it addressed to the appropriate representative.

Permitted Parties for Communications. For all other communications, and consistent with this broad interpretation of who a consumer is, the Rules also include as acceptable third parties for communications the deceased consumer’s spouse, parent (if the consumer is a minor), legal guardian, executor or administrator and Approving Successors (as defined in Regulation X). In addition, the Comments clarify that the terms ‘executor’ and ‘administrator’ include less formal personal representatives. See comment 6(a)(4)-1. “Persons with such authority may include personal representatives in the informal probate and summary administration proceedings…, persons who sign declarations or affidavits to effect the transfer of estate property, and persons who have authority over the financial assets of the deceased consumer or dispose of other monetary assets out of court.” Collection agencies should consider this clarification and begin reviewing their policies, procedures, and scripts to assess whether they are robust enough to adequately identify such parties.

Because the rule has a broader view of who a consumer is, collection agencies should begin reviewing their policies, procedures, scripts, and the content of letters to ensure they are properly communicating with the appropriate estate agents. Skip tracing and location contacts should be updated to identify deceased consumers and those authorized to act on behalf of the deceased consumer’s estate. Debt Validation Notices should be similarly updated to send Debt Validation Notices to the relevant designated agent of the Estate. Finally, policies and procedures should be updated to identify the appropriate third parties for further communication regarding the debt when the consumer is deceased.