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Washington, D.C. becomes the latest jurisdiction to ban outbound collection efforts during the pending coronavirus pandemic. The COVID-19 Response Supplemental Emergency and Temporary Amendment Act of 2020 passed unanimously yesterday, and D.C.'s Attorney General made clear that he would begin enforcing it immediately.
The new law goes into effect immediately and lasts until 60 days after the emergency ends. The law prohibits the outbound collection via any medium—phone calls, letters, electronic messages—to consumers from debt collectors and debt buyers. The law, however, allows for a debt collector to return consumer-initiated communications. The prohibition on outbound collection efforts explicitly does not apply to original creditors who are collecting on their own behalf.
In addition, the law prohibits both creditors and debt collectors from initiating legal proceedings, repossessions, or visiting a consumer's home regarding debts that are secured by a vehicle.
We previously wrote about the dangers of blanket collection bans—they allow consumers who are not financially impacted by COVID-19 to be unfairly enriched on the backs of others who will likely join the unemployed ranks. It's the right thing to do to provide hardship allowances to consumers who are impacted by the emergency, but as we've said before—the credit ecosystem is a two-way street.
Interestingly, DC's new ban on outbound collections does not apply to creditors. There are two points to this. First, what policy purpose—other than easy PR points for unjustly bashing debt collectors—does it serve to ban outbound collection efforts by third-party collectors while explicitly allowing it for creditors? If third-party collectors are banned from collecting, then creditors will have no choice but to ramp up their in-house collections to make up for it. DC's law seems arbitrary, and there are better ways of solving the problem, such as requiring collectors to provide hardship assistance to consumers if requested. Second, the new law leaves an open question: where do first-party collectors fall?
Most importantly, outbound communication bans from debt collectors prevent consumers from receiving important information about their accounts, which harms consumers in the long run.