Regulators in California, New York, and Illinois have unveiled a new regulation that would fundamentally change how written communications are delivered across the credit and collection ecosystem by requiring that all print correspondence be sent exclusively on biodegradable or recycled paper.
The rule is being framed by regulators as a bold step toward reducing paper waste and promoting sustainability in financial services. But for collection agencies, lenders, servicers, and healthcare providers, the operational and financial implications are going to be significant.
“The financial services industry has been foolish to wait this long to take action against the proliferation of paper that they produce, said April Foole with the Illinois Department of Sustainability.
On top of that, every mailing must be certified by regulators that it is being sent using approved paper prior to being mailed. Regulators said they will do their best to approve mailings as quickly as possible, but companies should be prepared for approvals to take “some time.”
According to the rule, the requirement applies broadly to any mailed communication tied to a consumer account, including:
- Collection letters
- Monthly statements
- Validation notices
- Payment reminders
- Billing summaries
The regulation applies to all communications, from mortgage lenders, credit card companies, collectors, banks, and anyone regulated in those states. It mandates that all such materials must be printed on certified biodegradable or 100% recycled paper stock, sourced from approved vendors. Glossy finishes, synthetic blends, and traditional bleached paper products are expressly prohibited.
Early estimates suggest that compliant paper materials could increase the cost of sending letters by as much as $3 per piece, not including the added burden of vendor vetting, certification tracking, and potential supply chain bottlenecks. Regulators cited this type of paper as an example of what could be used.
Non-compliance carries steep consequences:
- Fines of up to $5,000 per non-compliant letter
- Mandatory consumer remediation notices (printed, of course, on compliant paper)
- Potential suspension of mailing privileges within participating states
Regulators argued the rule is necessary to address the “excessive and often duplicative use of paper communications” across the financial services sector. In announcing the measure, officials pointed to the billions of letters sent annually by collection agencies and financial institutions, many of which are discarded shortly after receipt.
One regulator noted that “if even a fraction of these communications can be made more environmentally responsible, the impact could be significant.” The rule is scheduled to go into effect on April 1.
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