ACA International advocated for consumer protection and fair accounts receivable management industry laws and regulations in advance of the House subcommittee’s discussion Thursday. Editor’s note: This article is available for members only.
3/11/2021 14:30
Lawmakers stressed the importance of legal debt collection practices and access to credit and consumer communications, especially during challenging times like the COVID-19 pandemic, in a House Financial Services Subcommittee on Consumer Protection and Financial Institutions hearing Thursday.
“Multiple pieces of legislation attached to this hearing would suspend or prohibit debt collection,” said Subcommittee Ranking Member U.S. Rep. Blaine Luetkemeyer, R-Mo., in his opening remarks. “What my colleagues fail to realize is the majority of debts being serviced by debt collectors originate from small businesses that do not have the means to collect the debts themselves. In addition, prohibiting debt collectors from communicating with debtors eliminates the ability for collectors to work with consumers and get them on track to repay their debts.”
The hearing, “Slipping Through the Cracks: Policy Options to Help America’s Consumer During the Pandemic,” explored gaps in consumer protections during the pandemic and evaluated possible policy responses to ensure all consumers and small-business owners can get through this period of uncertainty and share in the economic recovery.
This is an important discussion. However, several of the bills at issue during the hearing present concerns for the accounts receivable management (ARM) industry and consumers. ACA International addressed concerns with the legislation on behalf of members and the ARM industry in a letter to the subcommittee.
Debt Collection
U.S. Rep. William Timmons, R-S.C., asked about the importance of the Consumer Financial Protection Bureau’s final debt collection rule in protecting consumers while also providing clear rules of the road for regulated industries.
“This is a great way to make it easier for those institutions to reach out to those with whom they have a pre-existing relationship,” said witness Joel Griffith, research fellow, financial regulations at The Roe Institute for Economic Policy Studies, The Heritage Foundation.
U.S. Rep. David Kustoff, R-Tenn., said debt collection restrictions in some of the bills on the hearing’s agenda impact small businesses. He asked Griffith for his input.
“Many small businesses actually rely on debt collection agencies to collect bad debts,” Griffith said. “If you handicap the ability of debt collection in general, you might be trying to help those that are in dire financial situations, [but] what you’re actually doing is impacting those small businesses [and] you’re making it harder for them to extend that credit in the future. And, long-term, it’s going to make those who need the credit the most even less likely to be able to obtain it.”
Credit Reporting
“Simply stated, if creditors cannot collect, they will be forced to not lend, and consumers, who much of this legislation at issue in this hearing aims to protect, will end up being harmed most,” ACA CEO Mark Neeb said in the letter to subcommittee Chairman U.S. Rep. Ed Perlmutter, D-Colo., and Luetkemeyer. “The work of the industry facilitates a marketplace where credit is more available to a broader range of consumers across a variety of income categories and credit histories.”
Discussion between the witnesses at the hearing and legislators also touched on this issue.
“Our country has a credit-based economy. That means it’s essential for lenders to evaluate borrowers’ ability to repay loans and it’s also essential for lenders to be able to collect debts,” said U.S. Rep. Barry Loudermilk, R-Texas. “Otherwise, no rational lender would blindly extend credit that may never be paid back, which would further [impact] those who need access to credit the most.”
Loudermilk also addressed legislation, reintroduced Thursday, from U.S. Rep. Patrick McHenry, R-N.C., ranking member of the House Financial Services Committee, that would ensure accurate credit reports for consumers.
The Protecting Consumer Access to Credit Act, H.R. 1645, “would make commonsense reforms to the Fair Credit Reporting Act to ensure accurate and secure credit profiles—a necessity for Americans’ continued economic recovery and future financial success,” according to a news release from McHenry’s office.
The bill would also remove all paid, non-elective medical debt from a consumer’s credit report.
Subcommittee members discussed how inaccurate credit reports and impeding debt collection ultimately impact access to credit.
“Throughout the pandemic, we have seen financial institutions make unprecedented accommodations for their consumers,” said U.S. Rep. John Rose, R-Tenn. “This serves as yet another reminder that federal intervention should not be the automatic answer even in times of crisis. I believe we need to be focused on economic recovery, and it is my concern that some of my colleagues on the other side of the aisle could be using the pandemic as an opportunity to restructure parts of our financial system by implementing long-time progressive policies that they advocated [for.]”
In response to questions about barriers to accurate credit reporting, Griffith said there are consequences to those barriers.
“If you impede the ability of lenders to actually have an accurate snapshot of the people to whom they’re intending to lend, there are going to be a few consequences,” Griffith said. “Either they’re going to deny access to credit to individuals who they would otherwise lend to … or they’ll have to increase interest rates on those [they are] making a loan to or, in some cases, across the board. We need to keep the focus on transparency and disclosure so that these lending companies can actually make … risk-informed decisions. It’s a benefit to all of us.”
In the letter to the subcommittee, ACA also presented industry research, reports on how members have been helping consumers during the COVID-19 pandemic, and examples of how these legislative proposals in their current form would impact members, especially small businesses, and consumers.
Read the complete letter sent to the subcommittee here.
Members interested in learning more about ACA’s advocacy strategy and opportunities to connect with state and federal legislators and regulators are invited to attend the Washington Insights Virtual Fly-In April 22.