WASHINGTON, DC — U.S. Sens. Cory Booker (D-NJ) and Mike Lee (R-UT) introduced the Stop Debt Collection Abuse Act of 2015, legislation that promotes fairness and strengthens protections for ordinary consumers against predatory debt collection practices.
“From unpaid traffic tickets to overdue student loans, debts owed to the government have too often become a license for debt collectors to harass and intimidate well-meaning families who are struggling to get by,” said Sen. Booker. “It defies logic that protections against predatory debt collection practices don’t apply to debt collectors hired by the federal government. It’s time that changed. We have a moral obligation to ensure all Americans, regardless of their debts, are treated with decency and respect.”
“There is clear need for a consistent standard for debt collectors that contract with the federal agencies,” said Sen. Lee. “Just like the Fair Debt Collection Practices Act protects consumers who owe private debts, this bill would protect individuals who owe debts to the Federal from harassment and exorbitant fees.”
The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from consumers. Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them. One of the biggest exemptions to the FDCPA, however, are debt collectors acting to pursue a debt owed to state or federal government entities.
The Booker-Lee bill mandates all federal agencies be subject to the same high standards of the FDCPA. Additionally, it requires a first-of-its kind study of debt collection practices at the state and local level, including of the contracting processes and the efforts of some debt collectors to go after low-income families. This important study conducted by the Government Accountability Office (G.A.O.) would examine the practices of debt collection at the local and state level. The bill would also confirm that debt buyers are debt collectors for the purposes of the FDCPA and prevent debt collectors from charging exorbitant and unreasonable fees.
At every turn, low-income Americans are being saddled with higher debt. Military service members have been taken to court by pay day lenders; low-income families have had small utility fees turn into excessive debt and lawsuits that impact them for years; non-profit hospitals have used debt collectors to sue poor patients over unpaid bills. One man in Kansas ended up in jail three times because he couldn’t pay the growing debt from an unpaid speeding ticket. People in St. Louis were thrown in jail because they were not able to pay for traffic violations. Courts throughout the country often rule on-behalf of debt collectors against defendants.
The Stop Debt Collection Abuse Act of 2015:
• Amends the FDCPA to make clear that the protections from overly aggressive debt collection practices also apply to debt collection agents hired by the federal government. This closes the loophole that allows for abusive practices by debt collectors hired by government agencies, and promotes fairness and consistency across this industry. Currently, only debts owed to the IRS are protected in statute by the FDCPA.
• Amends the FDCPA to make clear that debts owed by private individuals to federal government entities should be considered “consumer debts,” and fall under the FDCPA’s protections. This closes another loophole and promotes additional consistency in how debts are collected by the government and private entities.
• Prevents private debt collectors from charging exorbitant and unfair fees. The bill would ensure that fees from debt collectors working on behalf of the federal government cannot be greater than 10% of the amount collected and must be reasonable.
• Confirms that debt buyers are debt collectors for the purposes of the FDCPA. In some cases, courts have ruled that “debt buyers” are not covered by the FDCPA.
• Sets forth requirements that prevent debt collectors from taking aggressive action unnecessarily quickly after a debt has allegedly gone unpaid. This will help prevent confrontations in cases in which a consumer may have made an innocent mistake and suddenly faces threats of arrest.
• Ensures consumers who have been overpaid by federal agents by accident are covered by the FDCPA. Currently, there is nothing in the FDCPA that accounts for consumers who have been accidentally overpaid by the federal government and have had debt collectors come to rectify. This would codify that the FDCPA applies to these consumers as well.
• Requires the Government Accountability Office (GAO) to conduct a study into the use of third party debt collectors by state and local government. The study will examine the contracting process between states and local government agencies, fees, revenue sharing agreements, and consumer protections.
The Stop Debt Collection Abuse Act of 2015 is supported by the National Consumer Law Center.
