On July 13, 2021, in an alleged effort to protect consumers when Washington DC’s emergency covid protections expire, the DC Council approved a comprehensive debt collection bill to amend Section 28- 3814 (bill) of the DC Code. At this stage, the bill is awaiting the signature of the mayor of DC.
If the mayor chooses to sign it, it will come into effect immediately. While it is only temporarily effective as an emergency bill, it certainly has the potential to become permanent legislation. The bill appears to cover much more than covid-related elements, and according to the city council press release, the bill is designed to update DC’s 50-year-old collection law.
Who is covered:
The bill defines “debt collection” as “any action, conduct or practice in connection with the collection of debts which are due or owed, or which are allegedly due or owed, to a seller or to a lender by a consumer. “. Note that since the definition is not limited to debts owed to another person or entity, original creditors will engage in “debt collection” by attempting to collect their own debts.
The bill defines a “debt collector” as “a person directly or indirectly engaging in debt collection…”. Reading these definitions together, all of the provisions of the bill that deal with “debt collection” will apply to original creditors and traditional debt collection agencies. The bill also applies to debt buyers, who are considered “debt collectors” for all purposes provided by the bill.
Among other requirements, the bill
- limit phone calls to a maximum of three calls per 7 days to the consumer or any member of the consumer’s family or household (note that this restriction is per consumer, not per account).
- Before collecting or attempting to collect a debt, the debt collector must have complete and authenticated documentation certifying that he is the owner of the debt and the following documents:
- The name of the original creditor and the current creditor or owner of the debt;
- The last account number of the debtor with the original creditor;
- A copy of the signed contract, request or other documents proving the responsibility of the consumer and the terms of the contract / account;
- The date the debt was contracted;
- The date and amount of the last payment;
- Detailed accounting of the amount claimed, including principal interest, fees, charges, and whether the charges were imposed by the original creditor, a collection agent or a subsequent owner of the debt; and
- For credit card accounts, itemized accounting includes statements for the last twenty-four months.
- All of the above must be provided in writing to the consumer within five days of the initial communication, and the debt collector will cease any debt collection until it provides this information.
- For payment terms, the debt collector must provide a written copy of the payment arrangement or schedule to the consumer within seven days, and a consumer is not obligated to make a payment until such time as he is. this was not provided.
- Before taking legal action, the debt collector should undertake a reasonable investigation to verify the consumer’s current address for service of the proceedings.
- Any legal action to be collected must include the contract, demand, or other signed documents that provide evidence of consumer liability and must include specific claims.
- Before entering a default judgment, the collector must file
- certain commercial files authenticated with the court,
- a copy of the assignment establishing that he is the owner of the debt,
- each assignment if the claim has changed hands several times (if applicable),
- for purchased debt, something indicating the original account number linked to the consumer’s name.
- If a debt buyer does not provide the above, the action will be dismissed with prejudice.
- Punitive damages can be awarded for any intentional violation
- A debt buyer who violates the new requirements will be liable to the consumer for the following:
- Actual damage
- Reasonable legal fees and expenses
- punitive damages
- if the consumer is an individual, an additional penalty of at least $ 500.00 per violation and not more than $ 4000 per violation.
- In the case of a class action, the actual damages for each named plaintiff, plus legal costs and any other amount the court deems appropriate.
- If the plaintiff is the winning party in a debt collection action, the plaintiff will have the right to recover attorney’s fees if the contract or document evidencing the indebtedness contained a provision relating to fees.
Other notable changes and provisions:
- Upon expiration of the applicable limitation period, any subsequent payment will not extend the limitation period.
- A violation of the Fair Debt Collection Practices Act (FDCPA) will be considered a violation of the bill.
- During a public health emergency and for 60 days afterwards, there will be certain limitations on collections.
- The bill does not apply to loans secured by real estate or direct installment loans for motor vehicles.
The full bill is available here.
Because of the bill’s characterization as an “emergency” measure, it only required one reading before going to the mayor’s office for signature; there was no hearing on the bill and no opportunity to comment. Regardless of how the DC Attorney General described this bill, with the Covid health emergency debt collection ban extended until at least October 8, 2021, it’s unclear. what “urgency” this bill was supposed to correct. However, since it has been two weeks since it was sent to the mayor’s office and has yet to be signed, it looks like it may not have been quite the same ‘urgency’ for the mayor. Mayor of DC.
That said, it is likely that the bill will be signed off, so accounts receivable entities collecting in DC should review the bill in detail and ensure that policies, procedures, training and auditing are updated accordingly. Additionally, whenever bills like this emerge, the accounts receivable industry should worry that other jurisdictions are indeed copying these onerous provisions into proposed new legislation. Those who can fight this bill are encouraged to do so.