The model validation notice is another piece of the Reg F puzzle that, similar to the limited content message,
- Is not a mandate, it’s a safe harbor
- Comes down to risk, not fear
With the creation of the model validation notice, the CFPB provided an opportunity to limit litigation as it relates to letters.
Tim suggests three questions that can help you determine whether or not to use the model validation notice – watch or read more below!
Should You Use the Model Validation Notice?
The first thing to note is that like much of Reg F, this is not a mandate, but rather a safe harbor.
With that, Tim recommends asking yourself a few questions to determine whether or not you should take advantage of the safe harbor.
Question 1: Do you see a lot of lawsuits from the validation letter that you're sending?
If you are presently experiencing a lot of litigation from your validation letters, this might indicate you are on a plaintiff’s radar and it might be a good idea to explore switching.
Question 2: Am I a large market participant?
The CFPB defines a large market participant as an organization who has made an average of $10 million per year over the last 3 years.
Note: Even if you don’t make this amount, it doesn’t exempt you from the CFPB’s rules.
This is simply another risk factor to consider, in that if you are a large market participant, that comes with regulatory exposure. The CFPB may come in and do examinations, audits, requests for information, etc.
Question 3: What would it cost for you to make the change?
Some costs that come with switching may include:
- Partnering with a letter vendor
- Updating systems
In addition, make sure that your creditors can provide you with all the necessary information.
If for some reason you have to choose between using the CFPB’s notice, but not sending as many notices due to lack of access to information, conduct a cost benefit analysis.
*This information does not, and is not intended to, constitute legal advice; instead, all information is for general informational purposes only.