House Financial Services Committee Debates FDCPA Amendments


ACA International advocates for changes to legislation to balance the needs of consumers and businesses.

11/15/2019 9:00

The House Financial Services Committee advanced several bills to amend the Fair Debt Collection Practices Act after a two-day markup this week.

ACA has been advocating for some changes to these bills outlined in a letter submitted to Committee Chairwoman Maxine Waters, D-Calif., and Ranking Member Patrick McHenry, R-N.C.

The individual bills seek piecemeal changes to the FDCPA, such as expanding the definition of debt to include money owed to state or local governments, prompting committee discussion about the need for universal reform of the 1977 law.

“There are aspects of the FDCPA that should be updated … why don’t we take a crack at wholesale reform in a bipartisan way to [the] FDCPA … one that reflects the new technology available over the last 50 years and the ways people communicate with each other,” McHenry said in his opening remarks. “I think reforming the act would be a great way to modernize it.”

A bill from U.S. Rep. Gregory Meeks, D-N.Y., the “Debt Collection Practices Harmonization Act (H.R. 3948) that would extend the FDCPA to cover debt owed to a state or local government and adds specific requirements for national disasters passed with amendments.

Meeks’ amendment during the markup would mandate that private debt collectors who pursue debts such as municipal utility bills, tolls, traffic tickets, and court debts are subject to the FDCPA. It would also adjust monetary penalties for inflation and clarify that courts can award injunctive relief. His bill passed the committee by a vote of 31-23.

ACA does not support extending the FDCPA to debts owed to the federal government, and it also does not support extending it to local governments.

“Collecting government owed debt is an important part of a functioning economy and there may be a unique need for consumers to be able to efficiently resolve debts owed to a local government,” said ACA CEO Mark Neeb in the letter. “Allowing professionals in the accounts receivable management industry to aid local and federal government in collection efforts, benefits both consumers and the economy, since it is done in an efficient way.”

During Wednesday’s markup, the committee also advanced an amended version of the “Stop Debt Collection Abuse Act,” (H.R. 4403,) sponsored by U.S. Reps. Emanuel Cleaver, D-Mo., and French Hill, R-Ark.

The bill, which the committee passed in an unanimous 54-0 vote, would extend the FDCPA to collectors of debt owed to a federal agency and limit any interest, fee, charge, or expense incidental to the principal obligation. It states that these fees cannot exceed greater than 10% of the amount collected by the debt collector. The bill also mandates that debt buyers are subject to the FDCPA.

Reps. Cleaver and Hill introduced an amendment to the legislation during Wednesday’s markup defining debt and debt collector and setting a time limit for federal agencies to transfer or sell debt to a debt collector.

“This bill will close a number of loopholes,” Cleaver said.

ACA has several concerns about his bill and restrictions on communicating about government debt.

“Under the Obama administration, Congress has previously recognized the need for certain exemptions for debts owed to or guaranteed by the federal government in the Bipartisan Budget Act of 2015,” Neeb said. “Communicating about debt owed to the government is unique, for example, providing information about outstanding student loans may help borrowers avoid penalties or other negative consequences such as the ability to obtain a federal government job.”

The bill also requires a Government Accountability Office study on the use of debt collectors by local, state and federal agencies.

“We support this aspect of the bill and are confident that this study will be in line with other research in this area, which shows both consumer and economic benefits from debt collection efforts for the government,” Neeb said.

As co-sponsor of the bill, Rep. Hill said federal agencies should be held to the same standard as private industry when it comes to debt collection.

However, he added he agreed with McHenry in that some amendments to the FDCPA should be looked at more holistically.

“As we look at these one-off bills, we ought to collaborate on wholesale bipartisan reform of the Fair Debt Collection Practices Act,” Hill said.

Before Wednesday’s markup concluded, the committee considered the “Ending Debt Collection Harassment Act of 2019” (H.R. 5021) introduced by U.S. Rep. Ayanna Pressley, D-Mass.

The bill would prevent debt collectors from “harassing” consumers with unlimited electronic communication, including text and email, and mandates collectors to provide consumers with clear disclosures of their rights as well as a simple way of electronically opting out of communications.

Pressley said during the markup that the CFPB cannot be relied upon to report on consumer complaints. The bill also requires a state-by-state breakdown of complaints, specifically regarding electronic communication and “harassment” of consumers.

In opposition to the bill and urging a no vote by the committee, U.S. Rep. Steve Stivers, R-Ohio, said the bill would undermine CFPB modernization and block the CFPB from issuing its final rule on text and email, which gives clear guidance on electronic communication with debtors and already includes an opt-out option.

Stivers also noted the CFPB and Federal Trade Commission already provide reports on debt collection activities and the CFPB needs to be left to do its job.

Pressley’s bill passed the committee by a vote of 31-23.

State Enforcement Authority

Several bills discussed during the markup prompted debate between committee members on states’ authority to regulate debt collection practices through existing laws.

U.S. Rep. Lacy Clay, D-Mo., introduced legislation just before the markup to amend the FDCPA to include nonjudicial foreclosure proceedings into the definition of debt collection.

The “Non-Judicial Foreclosure Debt Collection Clarification Act,” (H.R. 5001), would “clarify that the definition of a debt collection includes, in all cases, a person in a business the principal purpose of which is the enforcement of security interests.”

Clay said his legislation stems from a U.S. Supreme Court case, Obduskey v. McCarthy & Holthus LLP, which determined that a “business engaged in on more than nonjudicial foreclosure proceedings is not a ‘debt collector’ under the Fair Debt Collection Practices Act, except for the limited purpose of enforcing security interests,” according to the SCOTUS blog.

Clay’s legislation seeks to counter that ruling.

“Action on this bill would provide needed protections for homeowners,” he said.

Ranking Member McHenry said he opposes the bill.

“It is a little more than an attempt to overturn the Supreme Court’s March 2019 decision which upheld state nonjudicial foreclosure statutes and rules that those persons are not subject to the same requirements as debt collectors,” McHenry said. “The states do a good job at regulating this. If we wish to change the law, we should go back to the states.”

H.R. 5001 passed the committee by a vote of 31-23.

U.S. Rep. Al Lawson, D-Fla., proposed the “Small Business Fair Debt Collection Protection Act,” (H.R. 5013) to expand the FDCPA’s protections to cover small business loans, as determined by CFPB in consultation with the U.S. Small Business Administration.

“This legislation would amend FDCPA to expand the definition of debt to include debt incurred from small business loans. It would restrict the means and methods by which collectors can contact small business debtors, as well as the time of day and number of times contact can be made,” according to the committee memorandum for the markup. “Furthermore, it would limit actions of third-party debt collectors who are attempting to collect debts from small businesses on behalf of another person or entity.”

U.S. Rep. Blaine Luetkemeyer, R-Mo., contended the CFPB should not have enforcement authority of commercial financial products.

“I could not overstate how problematic this would be,” Luetkemeyer said. “I am uncertain as to how the CFPB would be able to accomplish this task and for Congress to ensure it is doing it correctly,” he said, adding the Small Business Administration should have the authority to define what constitutes a small business, not the CFPB. “I don’t think the same law that protects consumers should be the one that protects small businesses, because there is a difference.”

In its letter to the committee, ACA also urged Congress to leave a bill to restrict the use of confessions of judgment for small-business owners to the states with existing requirements in this area.

The bill passed in the committee 31-23.

U.S. Rep. Nydia Velázquez, D-N.Y., introduced the “Small Business Lending Fairness Act,” (H.R. 3490) to restrict the confessions of judgment, which essentially is an agreement by which a borrower agrees to an eventual judgment of liability against them, without normal due process protections such as notice, a hearing, and judicial review.

U.S. Rep. Warren Davidson, R-Ohio, introduced an amendment that would require disclosures from creditors that an agreement contains a confession of judgment. The amendment did not pass in the committee.

“My amendment would help small-business owners by requiring clear disclosures, so they know exactly what stipulations they are agreeing to upon signing,” Davidson said.

Rep. Luetkemeyer said the legislation would have more support with such an amendment.

“We don’t want to ban confessions of judgment. I think a disclosure would accomplish what we’re seeking to do here,” Luetkemeyer said.

H.R. 3490 passed in the committee by a vote of 31-23 and, according to Politico, U.S. Sens. Sherrod Brown, D-Ohio, ranking member of the Senate Banking Committee, and Marco Rubio, R-Fla., chairman of the Senate Small Business Committee, introduced companion legislation in the Senate.

ACA will continue its advocacy surrounding this legislation. It is unclear yet, if and when, any of the bills will be taken up on the House floor. It is not expected that the Senate will take up and move forward with companion versions of most of these bills. However, there is a companion Senate bill introduced by U.S. Sen. Cory Booker, D-N.J., and Mike Lee, R-Utah, that has some of the same directives concerning debt owed to state and local governments.

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