Group to Study Uniform State Laws for Debt Buying and ARM Industry

The Uniform Law Commission announced in late July that it has formed a committee to study the feasibility of having uniform state laws on the transfer and recording of consumer debt. The influential group will also look at the viability of a universal registration system to record and track such transactions.

Noting the work of the Office of the Comptroller of the Currency (OCC), the Uniform Law Commission (ULC) said that it shares concerns about the “safety, soundness and consumer protection issues involved with sales of consumer debt.”

The ULC, formerly the National Conference of Commissioners on Uniform State Laws, is a prestigious group of attorneys focused on uniform legislation across all U.S. states and principal territories. Established in 1892, the Commission boasts past members that have included several Supreme Court Justices – including Chief Justice William Rehnquist and current Justice David Souter – U.S. Attorneys General, cabinet Secretaries, Senators, and even President Woodrow Wilson.

The ULC consists of approximately 350 commissioners appointed by each state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. All members are lawyers. Each is appointed to the Commission by the government of their respective state or territory.

A study committee is the first step in drafting a set of uniform state laws on a particular issue. The ULC typically has dozens of committees operating simultaneously on a wide range of issues (for example, in the announcement the other study committee that was formed will be looking at state regulation of driverless cars).

The Study Committee on the Transfer and Recording of Consumer Debt has 17 members and is expected to begin work this month.

The ULC is following the work of the OCC in attempting to craft universal standards for debt sales, transfers, and even placements of consumer debt for the purpose of collection. The OCC began their process in 2013 with guidelines for banks to use in debt sales and most recently issued more formal guidance on the matter.

The OCC’s guidance is long on documentation required for a portfolio sale. Similarly, states have separately passed laws that require certain documents to exist before a debt buyer can bring a collection suit.

The CFPB will also weigh in soon with new debt collection rules relating to the FDCPA. But the ULC’s main goal is to develop legislative language that can be universally adopted at the state level for application in state courts.