On July 13, 2021, in a purported effort to protect consumers when Washington D.C.’s emergency covid protections expire, the D.C. Council approved a comprehensive debt collection bill to amend D.C. Code Section 28-3814 (Bill). At the current juncture, the Bill is awaiting the D.C. mayor’s signature.
If the Mayor chooses to sign it, it will go into effect immediately. Although it will only be effective temporarily as an emergency bill, it certainly has the potential to become a permanent piece of legislation. The Bill appears to cover far more than covid related items, and per the city council’s press release, the Bill is designed to update D.C.’s 50-year-old collection law.
Who it Covers:
The Bill defines “debt collection” as “any action, conduct or practice in connection with the collection of claims that are owed or due, or are alleged to be owed or due, to a seller or lender by a consumer.” Note that since the definition is not limited to debts owed to another person or entity, original creditors will be engaging in “debt collection” by attempting to collect their own debts.
The Bill defines “debt collector” as “a person engaging directly or indirectly in debt collection… .” Reading these definitions together, all provisions in the Bill that address “debt collection” will apply to original creditors and traditional debt collection agencies. The Bill also applies to debt buyers, which are considered “debt collectors” for all purposes within the Bill.
Among other requirements, the Bill
- restricts phone calls to no more than three calls per 7 days to the consumer or any member of the consumer’s family or household (Note that this restriction is per consumer, not per account).
- Before collecting or attempting to collect a debt, the debt collector must have complete and authenticated documentation that the debt collector is the owner of the debt and the following documents:
- The name of the original creditor and the current creditor or owner of the debt;
- The debtor’s last account number with the original creditor;
- A copy of the signed contract, application, or other documents that provide evidence of the consumer’s liability and the terms of the contract/account;
- The date the debt was incurred;
- The date and amount of the last payment;
- An itemized accounting of the amount claimed to be owed, including principal interest, fees, charges, and whether the charges were imposed by the original creditor, a debt collector, or a subsequent owner of the debt; and
- For credit card accounts, the itemized accounting shall include the last twenty-four months of statements.
- All of the above items must be provided to the consumer in writing within five days of the initial communication, and the debt collector shall cease all collection of the debt until it provides this information.
- For payment arrangements, the debt collector must provide a written copy of the arrangement or payment schedule to the consumer within seven days, and a consumer need not make a payment until this has been provided.
- Before commencing a legal action, the debt collector must undertake a reasonable investigation to verify the consumer’s current address for service of process.
- Any lawsuit to collect must include the signed contract, application, or other documents that provide evidence of the consumer liability and must include specific allegations.
- Before the entry of a default judgment, the collector must file
- certain authenticated business records with the court,
- a copy of the assignment establishing it is the owner of the debt,
- each assignment if the debt has changed hands multiple times (if applicable),
- for purchased debt, something showing the original account number tied to the consumer's name.
- If a debt buyer fails to provide the above items, the action will be dismissed with prejudice
Provisions Related to Damages
- Punitive damages may be awarded for any willful violations
- A debt buyer that violates the new requirements will be liable to the consumer for the following:
- Actual damages
- Costs and reasonable attorney fees
- punitive damages
- if the consumer is an individual, an additional penalty in an amount not less than $500.00 per violation and not to exceed $4,000 per violation.
- In the case of a class action actual damages for each named plaintiff, plus court costs fees, and any other amount the court thinks is proper.
- If the plaintiff is the prevailing party in a debt collection action, then the plaintiff will be entitled to recover attorney fees if the contract or document evidencing indebtedness included a fee provision.
Other Changes and Notable Provisions:
- When the applicable statute of limitations expires, any subsequent payment will not extend the limitations period.
- A violation of the Fair Debt Collections Practices Act (FDCPA) will be considered a violation of the Bill.
- During a public health emergency and for 60 days after, there will be certain limitations on collections.
- The Bill does not apply to loans secured by real estate or direct motor vehicle installment loans.
The complete Bill can be found here.
Due to the classification of the Bill as an “emergency” measure, it required only one reading before going to the Mayor’s office for signature; there were no hearings on the Bill and no opportunity for comment. Regardless of however the D.C. Attorney General has described this Bill, with the ban on debt collection under the Covid Health emergency extended until at least October 8, 2021, it is unclear precisely what “emergency” this Bill was meant to correct. However, since it’s been two weeks since it was sent to the Mayor’s office and has not yet been signed, it seems maybe it wasn’t quite the same “emergency” for the D.C. Mayor.
That said, it is likely that the Bill will be signed, so accounts receivable entities collecting in D.C. should review the Bill in detail and ensure policies, procedures, training, and auditing are updated accordingly. Further, any time Bills like this surface, the accounts receivable industry should be concerned that other jurisdictions well copy these onerous provisions into proposed new legislation. Those who can put up a fight against this Bill are encouraged to do so.