From the Web: How the HEROES Act Constrains Debt Collection to the Detriment of Consumers

Competitive Enterprise Institute policy analyst weighs pros and cons of HEROES Act on the accounts receivable management industry.

5/28/2020 8:00 AM

NewsAdvocacy
From the Web: How the HEROES Act Constrains Debt Collection to the Detriment of Consumers

ACA International is working to educate Congress, and specifically the U.S. Senate, about the troublesome provisions in the $3 trillion “Health and Economic Recovery Omnibus Emergency Solutions (HEROES) ACT” that recently passed the U.S. House of Representatives.

In a blog post for the Competitive Enterprise Institute, Policy Analyst Matthew Adams, outlines concern with the legislation that mirror ACA’s issues as well.

Following is an excerpt from Adams’s article:

“The HEROES Act would further constrain the debt collection and credit reporting industries, to the detriment of consumers.

On the matter of debt collection, the legislation would place additional restrictions on the ability of debt collectors to service accounts, essentially placing a temporary moratorium on debt collection. More specifically, the HEROES act broadens the emergency restrictions under the Fair Debt Collection Practices Act (FDCPA) to prevent collectors from repossessing or foreclosing on any personal property or from garnishing wages or other income. Violations of these emergency restrictions would result in a fine 10 times normal FDCPA fines. And while these restrictions would only come into play during the ‘covered period’—from the date of enactment of the bill to a date 120 days after the COVID-19 pandemic ends—there is always the chance that Congress chooses to make the restrictions permanent.

While the restrictions under FDCPA have historically applied to third-party debt collectors, the HEROES Act would change that to also cover creditors—the banks, credit unions, and finance companies that originate loans. This would effectively bar lenders themselves from collecting on what they are owed.

Together, these proposed restrictions on debt collection would inevitably make credit more expensive. As George Mason University law professor Todd Zywicki notes in a 2015 paper, reducing the effectiveness of debt collection will “increase losses and lead to higher prices and less access to credit for consumers, especially low-income and high-risk consumers.”

That is exactly what we don’t need during a global pandemic and economic crisis.

Similar to the restrictions it would place on debt collectors, the bill would suspend negative credit reporting from the date of enactment to 120 days after the COVID-19 pandemic ends. The HEROES Act would also prohibit credit scoring agencies from introducing new credit models that would negatively impact a consumer’s credit score and prevent lenders from furnishing adverse information.

Because a credit score is a risk indicator that helps a lender determine a borrower’s ability to repay, lenders will not be able to accurately gauge risk—likely causing them to lend less, especially to those who need credit the most. And just like the HEROES Act’s restrictions on debt collection, the restrictions on credit reporting would make credit more expensive.”

CEI Senior Fellow John Berlau contributed to Adams’s post.

ACA appreciates that Congress considered its concerns about an outright ban on collections and did not include language limiting the ability to make phone calls. However, the HEROES Act proposes several changes that would have significant impact on the ARM industry outlined for members in a summary from ACA’s advocacy team.

For members interested in learning more about advocacy and action on Capitol Hill in the coming months, there is still time to register for the Washington Insights Livestream set for June 3.

For more information on how the ACA Licensing staff can assist with your licensing needs, please contact us at Licensing@acainternational.org or call (952) 926-6547.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

From the Web: How the HEROES Act Constrains Debt Collection to the Detriment of Consumers

ACA International is working to educate Congress, and specifically the U.S. Senate, about the troublesome provisions in the $3 trillion “Health and Economic Recovery Omnibus Emergency Solutions (HEROES) ACT” that recently passed the U.S. House of Representatives.

In a blog post for the Competitive Enterprise Institute, Policy Analyst Matthew Adams, outlines concern with the legislation that mirror ACA’s issues as well.

Following is an excerpt from Adams’s article:

“The HEROES Act would further constrain the debt collection and credit reporting industries, to the detriment of consumers.

On the matter of debt collection, the legislation would place additional restrictions on the ability of debt collectors to service accounts, essentially placing a temporary moratorium on debt collection. More specifically, the HEROES act broadens the emergency restrictions under the Fair Debt Collection Practices Act (FDCPA) to prevent collectors from repossessing or foreclosing on any personal property or from garnishing wages or other income. Violations of these emergency restrictions would result in a fine 10 times normal FDCPA fines. And while these restrictions would only come into play during the ‘covered period’—from the date of enactment of the bill to a date 120 days after the COVID-19 pandemic ends—there is always the chance that Congress chooses to make the restrictions permanent.

While the restrictions under FDCPA have historically applied to third-party debt collectors, the HEROES Act would change that to also cover creditors—the banks, credit unions, and finance companies that originate loans. This would effectively bar lenders themselves from collecting on what they are owed.

Together, these proposed restrictions on debt collection would inevitably make credit more expensive. As George Mason University law professor Todd Zywicki notes in a 2015 paper, reducing the effectiveness of debt collection will “increase losses and lead to higher prices and less access to credit for consumers, especially low-income and high-risk consumers.”

That is exactly what we don’t need during a global pandemic and economic crisis.

Similar to the restrictions it would place on debt collectors, the bill would suspend negative credit reporting from the date of enactment to 120 days after the COVID-19 pandemic ends. The HEROES Act would also prohibit credit scoring agencies from introducing new credit models that would negatively impact a consumer’s credit score and prevent lenders from furnishing adverse information.

Because a credit score is a risk indicator that helps a lender determine a borrower’s ability to repay, lenders will not be able to accurately gauge risk—likely causing them to lend less, especially to those who need credit the most. And just like the HEROES Act’s restrictions on debt collection, the restrictions on credit reporting would make credit more expensive.”

CEI Senior Fellow John Berlau contributed to Adams’s post.

ACA appreciates that Congress considered its concerns about an outright ban on collections and did not include language limiting the ability to make phone calls. However, the HEROES Act proposes several changes that would have significant impact on the ARM industry outlined for members in a summary from ACA’s advocacy team.

For members interested in learning more about advocacy and action on Capitol Hill in the coming months, there is still time to register for the Washington Insights Livestream set for June 3.

For more information on how the ACA Licensing staff can assist with your licensing needs, please contact us at Licensing@acainternational.org or call (952) 926-6547.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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