The House Financial Services Subcommittee on Consumer Protection and Financial Institutions will revisit debt collection legislation in a hearing Thursday.
3/10/2021 12:00
ACA International submitted a letter to House Financial Services Subcommittee on Consumer Protection and Financial Institutions leaders today in advance of their hearing on more than a dozen debt-collection-related bills that, as proposed, will do more harm than good to the economy, businesses and consumers.
The hearing, “Slipping Through the Cracks: Policy Options to Help America’s Consumer During the Pandemic,” at 10 a.m. EST Thursday, March 11, will explore gaps in consumer protections during the pandemic and evaluate possible policy responses to ensure all consumers and small-business owners can get through this period of uncertainty and share in the economic recovery, according to the subcommittee’s hearing memo.
This is an important discussion. However, several of the bills at issue during the hearing present concerns for the accounts receivable management industry and consumers.
“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 Ranking Member U.S. Rep. Blaine Luetkemeyer, R-Mo. “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.”
Following are some of ACA’s comments on the legislation at issue in the hearing:
The Relief for Consumers During COVID-19 Act
This legislation, which halts almost all collection activities, would be devastating to the economy, medical providers, small businesses, and many others during a time when they are already suffering. Consumer welfare also depends on open communication, and it is important to engage in policymaking during this critical time for the country that provides consumers with more options to access credit and services, not fewer.
The Debt Collection Practices Harmonization Act
This bill allows the damages amounts under the Fair Debt Collection Practices Act to be tied to inflation. The vast majority of FDCPA litigation is for hyper-technical violations, where there was arguably not actual harm to a consumer. Most notably, given the mechanical language and requirements under the FDCPA, self-described “consumer protection” attorneys have generated unnecessary litigation based on technical, inconsequential, non-abusive violations. Many consumer attorneys throughout the country coordinate with their clients to call collectors with the intent of eliciting a response that will form the basis of an FDCPA suit. These bait calls or trap calls are no different than acts of entrapment that plague well-intended collectors.
These attorneys burden collection agencies (which as noted above are often small businesses) with demands for tens of thousands of dollars to resolve claims arising from hyper-technical violations of the law. Moreover, they and their clients openly invoke the FDCPA as a pretext for avoiding the repayment of lawful debt. Some attorneys even use the FDCPA to drive their bankruptcy law practices. Many go so far as to search public court databases for newly filed collection actions to recruit new clients. Most importantly, these attorneys thrive on the mere threat of litigation, knowing that most agencies will pay $5,000 to settle a frivolous case instead of spending $50,000 to successfully defend one. In short, there is already abusive litigation in this area that rewards the trial bar more than actual consumers. Tying this type of litigation to inflation will only further reward lawyers, while associated costs continue to be passed on to consumers.
Ending Debt Collection Harassment Act of 2021
Regarding the provision that would prohibit, “allowing a debt collector to send unlimited email and text messages to a consumer,” in the Consumer Financial Protection Bureau’s debt collection rule, we disagree with this interpretation of the final rule and believe this legislation is misguided. Alternatively, the CFPB’s final rule instead addresses modern forms of communication and gives unprecedented power to consumers to control those modes of communication. Most notably, consumers have the ability to opt out of receiving messages and also control the contact information that they provide to creditors as an opt-in. In addition to this, there are many compliance hurdles that must be met for the accounts receivable management industry to be able to send emails and text messages in the first place, which require extensive training and compliance with the FDCPA and other consumer financial protection laws. The debt collection industry is not motivated to send unlimited communications causing consumers to opt-out after working hard to come into compliance with CFPB rules.
Additional legislation slated for discussion during the hearing includes:
The Relief for Small Businesses and Nonprofits Act
The Disaster Protection for Workers’ Credit Act
The Emergency Relief for Student Borrowers Act
The COVID-19 Mortgage Relief Act
The Promoting Access to Credit for Homebuyers Act
The Senior Investor Pandemic and Fraud Protection Act
The COVID-19 Fraud Prevention Act
The Fair Debt Collection for Service Members Act
The Small-Business Lending Fairness Act
The Non-Judicial Foreclosure Debt Collection Clarification Act
The Private Loan Disability Discharge Act of 2021
The Consumer Protection for Medical Debt Collections Act
In the letter, 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.
ACA will provide coverage of the hearing discussion in ACA Daily. Subscribe here for updates.
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.