On March 22, a bill to amend the Fair Debt Collection Practices Act was introduced in the Senate to expand consumer protections provided to debtors and small businesses during a major disaster or emergency—such as the current coronavirus (“COVID-19”) pandemic—beginning “1 day after the date on which a major disaster is declared by the President” until “120 days after the end of the incident period for that disaster.” The bill was introduced by Sen. Sherrod Brown (D-Ohio), and Sen. Elizabeth Warren (D-Mass.) and Sen. Cory Booker (D-N.J.) support the bill. Rep. Maxine Waters (D-Calif.) introduced a similar proposal in the House of Representatives.
The bill would revise the definition of “consumer” as set forth in 15 U.S.C. § 1692a from a “natural person” to an “individual.” It also would expand the definition of “debt” under the FDCPA by removing the requirement that a debt subject to the protections of the FDCPA be “primarily for personal, family, or household purposes,” and including explicit language that states a “debt” is one that “arises out of a transaction…with a small business.”
The bill provides that, without prior consent, debt collectors are allowed to communicate with consumers only for informational purposes, and only in writing, during a major disaster or emergency.
Debt collectors covered under the FDCPA would not be able to:
- Capitalize unpaid interest;
- Increase interest rate due to nonpayment;
- Charge a fee, sue, or threaten to sue, for non-payment;
- Continue collection litigation that was initiated prior to the disaster;
- Submit, or cause to be submitted, a confession of judgment in any court;
- Repossess, limit a debtor’s use, or foreclose on property to enforce a security interest;
- Take or threaten to take any action to enforce collection or for nonappearance at a hearing related to a debt;
- Garnish wages or seize assets, such as levying funds from a bank account; or
- Disconnect or terminate utility services.
Further, debt collectors would be required to shift payment periods until the incident is concluded.
Although the bill indicates that a creditor cannot collect through judicial avenues, it does not explicitly prohibit collection through non-judicial means. However, the bill does limit communication with consumers to those in writing, and that these communications must not be attempts to collect debts.
The bill does not take into account the loss mitigation measures that creditors currently have in place regarding debtors who have lost their income.
Troutman Sanders will continue to monitor the progress of both the Senate’s and the House’s attempts to amend the FDCPA in the wake of the current COVID-19 pandemic, and will provide updates as they occur.