Lively Debt Collection Debate Likely in House Fin. Servs. Committee Hearing Tomorrow

Tomorrow, the House Financial Services Committee will hold a hearing entitled “Examining Legislation to Protect Consumers and Small Business Owners from Abusive Debt Collection Practices.”  The Committee originally scheduled the meeting for June 25, 2019, but removed it from its calendar shortly before the meeting was to occur. Unlike the old announcement, the one for tomorrow’s meeting provides a memorandum with details, including a witness list.

The memorandum overviews the history of the federal policy of the Fair Debt Collection Practices Act (FDCPA). It discusses both the Consumer Financial Protection Bureau’s (CFPB) Notice of Proposed Rulemaking (NPRM) as well as the U.S. Supreme Court’s decision in Obduskey v. McCarthy—where the court found that the FDCPA does not apply to non-judicial foreclosure proceedings.

The memorandum also discusses the hardships faced by households struggling with debt. The memorandum addresses the large role that medical debt plays in consumers’ decision to file for bankruptcy and how student loans are burdening young adults, with a disproportionate impact on communities of color.

The memorandum closes with a list of several legislative proposals that the Committee will likely discuss in tomorrow’s meeting. Included in the list are proposed bills that would:

• Overturn the Supreme Court’s Obduskey decision,
• Extend the FDCPA to those collecting government debt,
• Extend certain consumer protections to first-party debt collection, and
• Prohibit restarting the statute of limitations through partial payments or acknowledgments of debt.

The hearing begins at 10:00 AM Eastern and will be live-streamed here.

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insideARM Perspective

With this hearing occurring shortly after the close of the comment period for the NPRM, it is likely to be a robust and timely debate. A lot of relevant issues—such as call frequency limits and communicating with consumers through electronic channels—will likely be front-and-center of the discussion. Unfortunately, the memorandum does not discuss the important role that debt collection plays in the credit ecosystem and appears to lump all debt collectors together as “predatory,” when in fact there are many debt collectors, such as members of the Consumer Relation Consortium, who try to comply with the law and respect consumers and their preferences.