A proposed new law in New Jersey that specifically addresses the collection practices of debt buyers advanced from its Assembly committee Thursday and now heads to the full chamber for consideration.
The “Consumer Credit Fairness Act” was introduced earlier this year and had been referred to the state Assembly’s Consumer Affairs Committee. On a 4-1 vote Thursday, the committee approved the bill on its second reading, sending it to the Assembly Speaker for further action.
In a statement of purpose in the bill’s text, its authors defined the intent of the legislation as:
Generally, the bill is intended to eliminate abusive practices in the collection of consumer debts by debt buyers and is to be enforced by the Director of the Division of Consumer Affairs.
As defined in the bill, “debt buyer” means a person that is engaged in the business of purchasing delinquent or charged-off consumer loans or consumer credit accounts or other delinquent consumer debt for collection purposes, whether it collects the debt itself, hires a third party for collection, or engages an attorney for litigation in order to collect the debt.
The bill prohibits debt purchasers from attempting to get a consumer to acknowledge a debt if that consumer has been through bankruptcy or the debt is beyond the statute of limitations. It also bars debt buyers from collecting fees and interest beyond those enumerated in the credit contract.
Before a debt buyer can attempt to collect a debt, the Consumer Credit Fairness Act requires the purchaser to have valid documentation that the debt buyer is the owner of the specific debt instrument or account at issue and reasonable verification of amount of the debt allegedly owed by the debtor.
It also lays out requirements for debt buyers bringing collection lawsuits against consumers. Any collection suit filed must be accompanied by “authenticated business records that contain the following:”
- The original account number;
- The original creditor;
- The amount of the original debt;
- An itemization of charges and fees claimed to be owed;
- The original charged-off balance, or, if the balance has not been charged off, an explanation of how the balance was calculated;
- An itemization of post charged-off additions, where applicable;
- The date of last payment; and
- The amount of interest claimed and the basis for the interest charged.
As for penalties, the bill allows that a debtor “aggrieved by a debt buyer” in violation of the new law “shall be entitled to payment from the debt buyer in an amount equal to any actual damages sustained by the debtor as a result of the violation and statutory damages of up to $1,000, together with reasonable attorney’s fees and court costs and such amount of punitive damages as the court may allow. This may be recoverable by the debtor in a civil action in a court of competent jurisdiction or as part of a counterclaim by the debtor against the debt buyer who aggrieved the debtor.”