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On March 22, Sen. Sherrod Brown (D-OH) introduced S. 3565, a bill to amend the Fair Debt Collection Practices Act (FDCPA) to expand consumer protections for consumers and small businesses during a major disaster or emergency—such as the current COVID-19 pandemic. Sen. Elizabeth Warren (D-MA) and Sen. Cory Booker (D-NJ) support the bill.
The bill covers a period of time beginning one day after the President declares a major disaster until 120 days after the end of the disaster period.
The bill's most interesting provision is that, without prior consent, it would only allow debt collectors to communicate with consumers in writing during a major disaster or emergency. The communication must also be for informational purposes and not an attempt to collect a debt.
The bill requires that debt collectors covered under the FDCPA cannot:
- Charge a fee for non-payment
- Sue or threaten to sue for non-payment
- Continue collection litigation that was initiated prior to the disaster
- Submit or cause to be submitted a confession of judgment in any court
- Enforce a security interest through repossession, limited use, or foreclosure
- Take or threaten to take any action to enforce collection
- Garnish wages or seize assets, such as levying funds from a bank account
- Disconnect or terminate utility services
- Add interest or fees to past-due balances
The bill also requires debt collectors to shift the payment periods until the incident is concluded.
It's a fast-changing environment, but this is a bill that we were expecting would come out at some point. A similar proposal was introduced by Rep. Maxine Waters (D-CA) in the House of Representatives.
This one is a little odd—it says you can't collect through judicial avenues. It doesn't flat-out say you can't collect through non-judicial means. But it also states that you can only communicate with consumers in writing and that these communications must not be attempts to collect debts. I think it's safe to assume they mean no outbound collections.
Such proposals to ban debt collection are well-meaning but don't take the full picture into view. While there are Americans whose income has been impacted by the pandemic, there are many others whose work has successfully shifted to work-from-home and are able to maintain their income.
For those who lost their income, debt collectors and creditors already have robust hardship measures in place to help. The PR machine makes it seem like collectors want to collect from consumers no matter the situation, but that is turning a blind eye to what debt collectors and creditors already offer to consumers in need.
For those who maintain their income, this ban on collection efforts in general means they can't continue with their payments, can't improve their financial standing and might preclude them from being able to take positive steps in their financial journey.
And, most importantly, these proposals—while aiming to help those who recently became unemployed due to the virus—would cause hundreds of thousands of other Americans to join the unemployed ranks.
Overall, there are better solutions than this one-size-fits-all ban.