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Bills
| 3.23.22

Should Protections for Debt-Holders Be Strengthened? (H.R. 2547)

Do you support or oppose this bill?

What is H.R. 2547?

(Updated February 27, 2022)

This bill, the Comprehensive Debt Collection Improvement Act, would strengthen protections for small business lending, ensure fair debt collection, advocate on behalf of consumers with student and medical debt, end debt collection harassment and abuse, and create guardrails for consumers against private debt collectors. A breakdown of its various provisions can be found below.

This bill’s provisions include language from multiple bills, each of which is listed below with its provisions: 

  • The Small Business Lending Fairness Act: would amend the Truth in Lending Act (TILA) to restrict the use of confessions of judgment for small business owners and to extend protections that currently exist in consumer lending.
  • The Fair Debt Collection Practices for Servicemembers Act: would amend the Fair Debt Collection Practices Act (FDCPA) to prohibit debt collectors from threatening a servicemembers with reducing their rank, having their security clearance revoked, prosecuting them under the Uniform Code of Military Justice, or otherwise communicating with a commanding officer or other senior officer in the chain of command above a servicemember regarding an outstanding debt.
  • The Private Loan Disability Discharge Act: would amend the TILA to require the discharge of private student loans if the borrower becomes permanently disabled. This would provide rights that already exist for federal student loan borrowers to private borrowers.
  • The Consumer Protections for Medical Debt Collections Act: would bar entities from collecting medical debt or reporting it to a consumer reporting agency without giving a consumer notice about their rights under the FDCPA and Fair Credit Reporting Act (FCRA) related to that debt. These rights include a minimum one-year delay before adverse information is reported to a credit reporting agency and barring the reporting of adverse information relating to medical debt due to medically necessary procedures.
  • The Ending Debt Collection Harassment Act: would amend the FDCPA to prohibit debt collectors from contacting consumers via email or text message without the consumer’s consent to be contacted electronically.
  • The Stop Debt Collection Abuse Act: would extend FDCPA protections as it relates to debt owed to a federal agency and limit the fees debt collectors can charge. Additionally, this section of the bill would require the Government Accountability Office (GAO) to conduct a study on government agencies’ use of third-party debt collectors.
  • The Debt Collection Practices Harmonization Act: would expand the definition of debt covered under the FDCPA to include money owed to a state or local government, clarifying that private debt collectors who pursue debts such as municipal utility bills, tolls, traffic tickets, and court debts are subject to the FDCPA. It would also update monetary penalties for inflation and clarify that courts can reward injunctive relief and add protections to consumers affected by national disasters.
  • The Non-Judicial Foreclosure Debt Collection Clarification Act: would reverse the recent Supreme Court decision in Obduskey v. McCarthy and Holthus LLP by amending FDCPA to clarify that entities in non-judicial foreclosure proceedings are covered by the statute. 

Argument in favor

Debt collectors are notoriously aggressive with debtors, often using intimidation tactics and harassment to scare debtors. This bill would ensure that collectors can’t use overly aggressive tactics and make certain types of debt not reportable for credit purposes to provide important protections for debt-holders. Additionally, this bill includes important updates, such as adjusting statutory damages available under the federal Fair Debt Collection Practices Act for inflation and indexing them for inflation in the future, to update debt collection practices at the federal level.

Argument opposed

While most people would agree that debt-holders should not be harassed or threatened by debt collectors, it is also important to bear in mind that collection of unpaid debt is an important linchpin of ensuring a functioning credit economy. Similarly, accurate credit reporting information is needed for lenders to make accurate judgments about potential borrowers’ creditworthiness. This legislation runs the risk of undermining the economy’s necessary credit extension and debt collection functions.

Impact

Individual, business, and servicemember holders of debt; debt collectors; protections for debt-holders; Truth in Lending Act (TILA); and Fair Debt Collection Practices Act (FDCPA).

Cost of H.R. 2547

A CBO cost estimate for this legislation is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Maxine Waters (D-CA) introduced this bill to strengthen protections for debt-holding business owners, consumers, and servicemembers. At April 21, 2021 full committee markup at which this bill was considered, Rep. Waters said:

“In the midst of the pandemic crisis, predatory debt collectors have made record profits while continuing with their abusive, harassing tactics while consumers struggle to make ends meet through no fault of their own. At this mark up, we will consider my bill, H.R. 2547, the Comprehensive Debt Collection Improvement Act, which includes several measures by Representatives Velázquez, Meeks, Cleaver, Dean, Tlaib, Pressley, and Auchincloss to protect consumers from abuses by debt collectors.”

The National Association of Consumer Advocates (NACA) supports this legislative package. In an April 20, 2021 press release, NACA legislative director Christine Hines said:

“We welcome the bill’s proposal to finally adjust statutory damages available under the federal Fair Debt Collection Practices Act (FDCPA) for inflation and index them for inflation in the future -- for the first time since the law passed nearly 44 years ago. While statutory remedies for victims of debt collection violations have stayed stagnant since 1977, the average price of a home has increased by 988% and the cost of a one-night hospital stay has gone up 286%. We also hope the committee will pass the other much-needed protections this package would bring to the 68 million Americans with debts in collections. Prohibiting certain abusive practices directed at servicemembers, including threats to reduce rank or revoke security clearance; stopping collection of medical debt for the first two years and credit reporting of debt arising from any medically necessary procedures; extending FDCPA coverage for all federal, state, and local debts collected by debt collectors; and other proposals, are necessary additions to the consumer protection landscape, especially now during a global pandemic that has jeopardized household finances across the country.”

The Credit Union National Association (CUNA) expressed concerns about this bill’s proposal to block the inclusion of medical debt in credit reporting. In a letter dated April 20, 2021, CUNA President and CEO Jim Nussle wrote:

“Restrictions on the reporting or consideration of certain debt prevents lenders from seeing borrowers’ complete debt circumstances and clouds lenders’ ability to fairly assess borrowers’ creditworthiness. An incomplete view of borrowers’ credit history reduces lender confidence in credit reports and scores, impacting pricing decisions and credit availability.”

In the same letter, CUNA also expressed concerns about the expansion of FDCPA coverage of non-judicial mortgage foreclosures:

“This provision will expose mortgage servicers to increased FDCPA liability, and produce regulatory compliance challenges for entities enforcing security interests. Again, for consumers, the impact will be seen in pricing and credit availability; for financial institutions, resources will be wasted complying with and defending against judicial action associated with this provision. We would strongly urge the Committee to first conduct a thorough fact-finding into the increase in lending and servicing costs before considering this measure.”

House Financial Services Committee Republicans opposed this bill when it was considered in committee. In their minority views, the Republicans argued that while consumers should not be subject to harmful debt collection practices, “recouping a loss is necessary for a credit-based economy to function properly.” They wrote: 

“H.R. 2547 is a progressive retread of several bills from the 116th Congress. If enacted, this bill will fundamentally restructure the consumer credit market as well as how businesses, most of whom are small businesses, are paid for their services. As a result, credit will be more expensive for all borrowers and may exclude the lowest income borrowers entirely.”

In addition to criticizing this bill’s individual provisions for weakening various aspects of the debt collection process and credit reporting system, Financial Services Committee Republicans also took issue with the rejection, on a party-line vote of 23-30, of Ranking Member Patrick McHenry’s (R-NC) amendment to replace the underlying bill with several targeted attempts to improve and strengthen the debt collection and credit reporting framework.

This legislation passed the House Financial Services Committee by a party-line 31-23 vote with the support of seven Democratic House cosponsors. A collection of consumer groups, including Americans for Financial Reform, the Center for Responsible Lending, Consumer Action, the Consumer Federation of America, Consumer Reports, Public Citizen, and the National Consumer Law Center (on behalf of its low-income clients) supports this legislation.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / Olivier Le Moal)