Congress Considers Expanding Federal Consumer Debt Collection Protections During National Emergencies

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With COVID-19 holding the global economy captive, Congress is attempting to head off what they predict will be an economic tidal wave of evictions, foreclosures and civil judgments by introducing The Small Business and Consumer Debt Collection Emergency Relief Act of 2020 (the “Bill”). Per its Senate sponsors, the Bill would modify and expand the Fair Debt Collections Practices Act or FDCPA (the “Act”)—the federal statute that regulates consumer debt collection practices—to better protect individuals during national emergencies and also safeguard the nation’s small businesses.

The current Act focuses on prohibiting abusive and deceptive collections tactics, such as calling debtors late at night and concealing the debt collector’s identity. While the Act has helped curb those practices, it provides no mechanism for temporary debt relief in the event of a national or global crisis. The current Act also only applies to the collection of consumer debt; small businesses are afforded no such protection. The Bill therefore proposes expanding the Act’s consumer protections during a “major disaster and emergency” and extending those protections to small businesses.

Notable amendments to the Act would

  • remove the exclusionary language that states only personal or household debt is subject to the Act, and add language expressly stating the Act applies to small business debt;
  • broaden the term “creditor” to include any person or entity who offers or extends credit creating a debt, any lessor of real or personal property, and any provider of utility services; and
  • expand the term “debt collector” to include creditors collecting their own debts, as well as any person or entity engaged in debt collection.

The Bill further proposes that during major disasters or emergencies, creditors and debt collectors be required to suspend or shift payments until 120 days after the emergency has ended, and be barred from

  • capitalizing unpaid interest;
  • raising an interest rate as the result of non-payment;
  • charging a fee for non-payment;
  • suing or threatening to sue for non-payment;
  • continuing litigation to collect a debt that was initiated before the date the Bill was enacted;
  • submitting a confession of judgement to any court;
  • enforcing a security interest through repossession, limiting use or repossession;
  • taking or threatening to take any action to enforce collection, or any adverse action for non-payment;
  • commencing or continuing any action of garnishment;
  • commencing or continuing eviction proceedings; or
  • disconnecting or terminating utilities (including Internet service).

Similar versions of the Bill are now moving through both houses of Congress. There is, of course, no way of knowing what bill may ultimately become law, if at all, or what amendments might be added along the way. That said, there is little doubt that debt collection—in the context of the COVID-19 pandemic and future national emergencies—will be a hot legal topic for the foreseeable future.

Miles & Stockbridge is closely monitoring current events and legislative developments, and remains ready to help its clients navigate this complex and ever-changing legal landscape.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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