House-passed bill could give millions of working families some debt collection protections they need.
By Sophia Huang
For years now, debt collection has been one of the most complained about issues at the Consumer Financial Protection Bureau and the Federal Trade Commission. Consumers report experiencing threats, harassment, invasions of privacy, receiving misleading communications, being sued over debts they do not owe, and much more. Now, with household debt rising to new highs during the ongoing pandemic and the debt collection industry remaining as active and aggressive as ever, the Comprehensive Debt Collection Improvement Act, H.R. 2547 could be a welcome source of relief for servicemembers, student loan borrowers, and consumers with medical debt.
Passed by the U.S. House of Representatives, 215-207, H.R. 2547 would implement long-needed protections and not a moment too soon. One reform of note included in the legislation is a measure to update the amount of statutory remedies available to harmed consumers under the Fair Debt Collection Practices Act (FDCPA).
FDCPA statutory remedies have been capped at the same amount since the law was passed 44 years ago in 1977. Due to the effects of inflation, the remedies are worth less than a third of what they once were. For abusive debt collectors, this means the price of using risky tactics and harming consumers has decreased dramatically. For consumers, it means the compensation they can receive for standing up themselves and holding debt collectors accountable is worth less than ever. If statutory remedies do not keep pace with economic realities, they will only continue lose power as deterrents for bad actors and lose value to consumers as redress.
To put into perspective how far the value of FDCPA statutory remedies has fallen, consider how the prices of basic necessities have changed since 1977 while remedies stayed stagnant. For instance, the average cost of rent has increased by over 531% and the average price of a home has increased by around 988%. Similarly, the price of a gallon of gas has more than tripled in that time and the price of a gallon of milk has more than doubled. As the world has grown more expensive for consumers to live in, their remedies after being harmed by debt collectors have plunged. H.R. 2547 takes the important step of adjusting and indexing FDCPA statutory remedies for inflation — as a needed upgrade to the law.
H.R. 2547 would also address several other urgent problems consumers that consumers face in debt collection, including the proposal to prohibit collection of medical debt for the first two years and to prohibit credit reporting of debts incurred for medically necessary procedures. Such protections are needed now more than ever with COVID-19 patients reporting massive bills after hospital stays and thousands still being hospitalized every week.
Debt collection can also sometimes have a tangible negative effect on military careers which can pile on additional stress. H.R. 2547 would ease some of the stress on servicemembers by prohibiting debt collectors making threats of reduction in rank, revocation of security clearance, or prosecution under the Uniform Code of Military Justice.
A California servicemember, for example, saw his career advancement stall due to abusive collection tactics. A creditor repeatedly contacted the servicemember’s chain of command about his debt even after it was asked to stop. As a result, the servicemember was reprimanded and his chances of promotion plummeted because his chain of command began looking upon him negatively.
The measures aimed at limiting electronic communications are timely as well. Last year, the CFPB attempted to address debt collectors’ use of text messages, emails, and direct messages on social media in a regulation, but it fell short. The rule would allow debt collectors to contact consumers via text and email without first obtaining consent and to send validation notices electronically. This would make it more likely that some consumers do not receive crucial information about the debts they allegedly owe, such as in instances where a consumer has limited access to technology, or the debt collector is using outdated or incorrect contact information.
Considering how often debt collectors go after consumers for debts they do not owe or are expired, it is critical that consumers be able to review information about any alleged debts they are being asked to pay. That’s why H.R. 2547 includes provisions requiring debt collectors to send written validation notices and to get consent before using electronic communications.
The House also passed a crucial amendment on old, expired debt. Time-barred debts are past their statutes of limitations, meaning debt collectors cannot sue to collect them. Time limits on debt exist because the older a debt is, the less likely a collector is to have reliable documentation about who owed the debt and the amount owed. While debt collectors are not permitted to sue on these old debts, they can still pressure consumers to pay them, which can restart the clock in some cases. The amendment would put an end to time-barred debt collection so collectors will no longer be able to go after consumers for old debts.
Additional protections in the Comprehensive Debt Collection Improvement Act include requiring discharge of private student loans in cases of total and permanent disability, extending FDCPA coverage to federal, state, and local debts collected by private debt collectors, ending the use of confessions of judgment, and more.
Debt collection reform is long overdue, but now with many households teetering on the edge due to the financial fallout of the pandemic, it is needed to ensure that harmful and abusive conduct do not spread any further. Now that the House has passed H.R. 2547, we look to the Senate to take up and pass the same protections quickly.