For those involved in the extension of credit and the debt-collection industry, the “alphabet soup” of industry-related rules, statutes, and regulations, including the Fair Debt Collection Practices Act
(FDCPA), Fair Credit Reporting Act
(FCRA), and Truth in Lending Act
(TILA), are too familiar. Most of these Acts have received only minor updates since the 1970s.
On May 13, 2021, the U.S. House of Representatives passed H.R. 2547
, also known as the Comprehensive Debt Collection Improvement Act (CDCIA). If passed by the Senate, the CDCIA would amend several existing consumer finance statutes and impose new requirements and limitations on debt collectors.
Some of the more notable amendments provided for by the CDCIA include:
- Expanding the FDCPA to cover law firms handling non-judicial foreclosures;
- Amending the FDCPA to prohibit a debt collector from contacting a consumer electronically, including by email, text message, and direct message through social media, without a consumer’s prior consent;
- Requiring the discharge of private student loans upon a borrower's death or total and permanent disability;
- Installing regulations for debt owed to federal agencies that is sold or transferred to debt collectors;
- Adjusting the damages amount permitted under the FDCPA for inflation and expressly permitting courts to award injunctive relief;
- Amending TILA to prohibit the use of cognovits or confessions of judgment for small business owners as an unfair credit practice;
- Amending the FDCPA to regulate communications with servicemembers, including prohibiting the use of threats to reduce rank or revoke security clearance;
- Amending the FDCPA to provide a two-year waiting period before an entity can collect or attempt to collect a medical debt;
- Amending the FCRA to prohibit the credit reporting of a debt arising from any “medically necessary procedure” and requiring the provision of prior notice of rights to a consumer before furnishing information regarding the medical debt of a consumer to a consumer reporting agency; and
- Amending the FDCPA to include a loan, overpayment, fine, penalty, restitution, fee, or other money owed to a federal, state, or local government as “debt” subject to the FDCPA.
Of particular note is the expansion of the FDCPA to cover law firms handling non-judicial foreclosures. This would directly reverse the U.S. Supreme Court’s decision from 2019 in Obduskey v. McCarthy and Holthus LLP
, 139 S.Ct. 1029. In Obduskey
, the Supreme Court held that entities enforcing a security interest, without also seeking repayment or deficiency judgment
, generally do not qualify as debt collectors under the FDCPA.
The CDCIA is now in the hands of the Senate. The House passed the act by a narrow margin, mostly along party lines. The Senate is evenly divided, which leaves the ultimate fate of the Act unpredictable. On May 17, 2021, the Act was referred to the Committee on Banking, Housing, and Urban Affairs and may undergo further revisions before final submission.
Weltman will continue to stay up-to-date on any movement on this Act in the Senate and keep our clients informed. If you have any questions, feel free to reach out to Nathan Duvelius
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.