Maryland Legal Alert - December 2020





CFPB Issues Final Debt Collection Rule

On October 30, 2020, the Consumer Financial Protection Bureau (CFPB) issued the first part of its long-awaited final rule implementing the Fair Debt Collection Practices Act (FDCPA) via amendments to Regulation F (Reg F). The final rule largely focuses on communications between debt collectors and consumers. Notably, the final rule directly addresses more modern forms of communication, such as text messaging, emails and social media. Highlights from the final rule include:

  • Safe Harbor for Limited-Content Messages — The final rule creates a “limited-content message” that is not considered a communication under the FDCPA. Notably, this allows a debt collector to leave a voice mail that encourages the debtor to return a call, without disclosing sensitive information that may otherwise trigger an FDCPA violation.
  • Email and Text Messages — Debt collectors may use email or text messages, but the emails and text messages must include instructions for a reasonable and simple method for consumers to opt out of receiving further emails or text messages.
  • Social Media — Debt collectors cannot use social media to contact a consumer if such a communication can be viewed by the public or the consumer’s social media contacts. Debt collectors may contact a consumer through a direct message that is not visible on the consumer’s social media platform.
  • Call Frequency — A debt collector is presumed to violate the FDCPA’s prohibition on repeated telephone calls if the debt collector calls a consumer more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the consumer.
  • Record Retention — A debt collector must maintain records of compliance or noncompliance from the date that the debt collector begins collection activity on a debt until three years after the debt collector’s last collection activity on the debt. Debt collectors must retain telephone call recordings for three years after the dates of the telephone calls.

Practice Point: The final rule, which becomes effective November 30, 2021, sets out certain safe harbors that should guide debt collectors as they review their policies and oversight systems. In the coming months, the CFPB plans to issue additional final rules concerning debt validation notices, credit reporting and collection of time-barred debts.

Please contact Bryan M. Mull with any questions concerning the FDCPA final rule.

Editor's note: This article was updated January 27, 2021, to correct the effective date of the final rule.

Contact Bryan M. Mull | 410-576-4227

SBA PPP Questionnaires Raise Questions

On October 26, 2020, the Small Business Administration (SBA) released two loan questionnaire forms to be used in connection with Paycheck Protection Program (PPP) loans of $2 million or more. The new questionnaires (Form 3509 — for-profit borrowers and Form 3510 — nonprofit borrowers) were published in the Federal Register for a 30-day comment period. PPP loans were created under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act required that PPP borrowers certify that a loan request was being submitted because of economic uncertainty related to the COVID-19 crisis. The CARES Act measured the economic uncertainty at the time of the application.

The new SBA forms create uncertainty for PPP borrowers with loans of $2 million or more, because they seek post-application information concerning coronavirus-related financial impacts. The new forms seek the following information:

  • Gross receipts and expenses for the 2020 second quarter as well as similar information for the second quarter of 2019;
  • Borrower’s assets and liquidity as of the end of the quarter just prior to submitting a loan forgiveness application;
  • Whether a borrower received any other CARES Act relief and whether any debt was prepaid in 2020; and
  • Amounts paid to certain high-income employees.

The preamble to the forms indicates that the information will be used to “inform” the SBA’s review of a borrower’s decision to apply for a PPP loan and subsequently seek forgiveness and that determinations will be made based on a totality of the circumstances.

As of late November, more than 80 comments questioning the appropriateness of the forms had been submitted, including one challenge to the administrative procedures followed by the SBA in releasing the forms. PPP loan borrowers who obtained loans of $2 million or more should gather the information required by the new forms to be prepared in the event that the forms are finalized as is, but borrowers should consider waiting to submit forgiveness applications until later in 2020 to see if the SBA pulls back the forms or seeks to collect less information.

Please contact Christopher R. Rahl with questions concerning PPP loans.

Contact Christopher R. Rahl | 410-576-4222

Extended Claims Bar Date for Federal Credit Unions

Recently, the New Mexico Bankruptcy Court held that a federally chartered credit union was a “governmental unit” under the Bankruptcy Code; thus, the credit union was entitled to the extended claims bar date applicable to governmental units in a Chapter 7 bankruptcy case.

In this Chapter 7 case, a federally chartered nonprofit credit union filed its proof of claim three days after the expiration of the claims bar date, but several weeks ahead of the extended governmental claims bar date. To share in the distribution to unsecured creditors, the credit union argued that it was subject to the governmental claims bar date and, therefore, filed a timely proof of claim. To qualify as a governmental unit, the court had to determine that the credit union was an “instrumentality of the United States.” While no specific test determines what qualifies as an “instrumentality of the United States,” the court considered factors including whether the particular entity performs an important governmental function, whether the entity is subject to extensive government regulation, and whether the entity is exempt from taxation.

The court found that federal credit unions are governmental units entitled to the extended deadline for filing claims. While some jurisdictions have been hesitant to say that federal credit unions are governmental units for all purposes in the Bankruptcy Code, the New Mexico bankruptcy court found no compelling reason to treat the defined term differently in different parts of the Bankruptcy Code. In reaching this conclusion, the court highlighted the important governmental functions federal credit unions perform, their extensive amount of federal regulation, their immunity from state taxation and their federal charters.

Notably, this decision aligns with a 1997 decision by Maryland Bankruptcy Court, In re Trusko. In the Maryland case, the court determined that the legislative history for the Bankruptcy Code and the Federal Credit Union Act suggested that federal credit unions should be considered governmental units entitled to the extended deadline for filing claims under Section 502(b)(9) of the Bankruptcy Code.

Practice Point: This case is a reminder that in bankruptcies, some financial institutions are subject to the governmental claims bar date, while others remain subject to the ordinary claims bar date. In any event, claimants should endeavor to file their claims promptly regardless of which deadline applies.

Please contact Christopher R. Rahlwith questions concerning bankruptcy claims procedures.

Contact Christopher R. Rahl | 410-576-4222


December 02, 2020




Mull, Bryan M.
Rahl, Christopher R.


Financial Services