JOINT FAVORABLE REPORT
AN ACT CONCERNING THE REFORM OF DEBT COLLECTION PRACTICES.
Joint Favorable Substitute
SPONSORS OF BILL:
Banks Committee, Rep. Linda Orange, Rep. Bryan Hurlburt, Rep. David W. Kiner, Rep. Toni E. Walker, Timothy R. Bowles, Rep. Claire L. Janowski, Rep. Mae M. Flexer, Rep. Susan M. Johnson, Rep. Peter A. Tercyak
REASONS FOR BILL:
To protect consumers from predatory debt buyer practices. It seeks to reform the process of debt collection by introducing stronger requirements on the activities of a debt buyer, as well as specifying exactly what constitutes a debt buyer. These requirements concern legal action with respect to these debts, such as identifying proof of the validity of a debt prior to legal action, specifying the statute of limitations on such legal action, and requiring a notice to the consumer of no less than 30 days of legal action.
The substitute language makes technical corrections, clarifies that an electronic signature is sufficient proof of debt when applicable, and makes an effort at fixing the technical problem caused by the state system's inability to protect privacy with filings, by requiring documentation to be mailed to the debtor instead of filed with the claim.
RESPONSE FROM ADMINISTRATION/AGENCY:
NATURE AND SOURCES OF SUPPORT:
AARP: states that this legislation will strengthen CT law and help to protect consumers from abusive debt buyer practices. They believe that this bill will help to protect consumers, especially those who are older, as those are the people whom the organization represents. The organization states, “This bill aims to reform the flawed debt collection system in which debt collectors target thousands of consumers each year – many of them older – without the foundation to support the lawsuits.”
State Representative Linda Orange: states that there have been innumerable issues in the field of consumer debt, the number of which has increased dramatically within the past few years. She states, “Debt buyers should adequately document their debts before suing, and before winning judgments. This seems like such a fundamental requirement, yet consumer debt purchasers on the secondary market are not bound by it. Similarly, there needs to be advance notice given to consumers prior to the following of such laws.”
Liz Dupont-Diehl, Policy Director, CT Association for Human Services: states that debt buyers should be required to provide basic evidence to both the consumers and the court before filing a lawsuit and obtaining judgment. She states, “People are being sued beyond the statute of limitations; without sufficient proof of debt; and using partial payments to claim the statute of limitations should be extended.” She believes that there is a need for protection of low-income workers and families against wrongful debt collection and predatory tactics used by debt buyers. She also notes that debt buyers, as owners of a debt, are already covered by the Creditor's Collection Protection Act.
State Representative Hurlburt et al: state that they believe this legislation is important to ensure that consumers are protected from predatory debt collection practices. They also stress their support of the testimony of ConnPIRG, asking for revisions to the Creditor's Collection Protection Act. They believe that the language proposed by ConnPIRG is consistent with the original intent of this bill, and will provide consumers with increased protection against certain nefarious collection practices.
Abraham Scarr, Director, Connecticut Public Interest Research Group: submitted proposed language to strengthen consumer protections and curb disreputable practices of debt buyers. He states that when debt buyers purchase debts, they are not considered collection agencies, but as creditors. He states that the proposed language clarifies that these debt buyers are already covered by the Creditor's Collection Protection Act. He states that the provisions of the bill include providing 30 days' notice before filing suit, making sure that debt is documented before a suit is filed, clarifying that partial payment does not extend or renew the statute of limitations, and giving judges more flexibility to grant awards to defendants when debt buyers incorrectly go through this collection process.
Daniel Ravizza, organizer, Connecticut Citizen Action Group: states that CCAG supports this bill with language submitted by ConnPIRG. CCAG believes that consumers should be protected from “zombie debt,” which is a debt that is purchased by a third party from the original owner of the debt, which, in many cases, may already be taken care of. He states, “The common-sense changes in the language of this bill will save many consumers the headache of seeking legal counsel or more drastic measures when they need not do so.”
Raphael L. Podolsky, Legal Assistance Resource Center of CT: states that the bill requires that collection agencies would be regulated as creditors and that they are required to prove the existence of such debt. He notes that in recent years, the debt buyer industry has ballooned. He also notes that the debts on which debt buyers sue tend to be old, often with minimal information about the debt itself. Many times, he states, debt buyers are aggressive in debt collection, even when they have insufficient information about the debt. He states, “The ConnPIRG proposal would work within the framework of the Creditors' Collection Practice Act to establish clear proof requirements and sanctions in debt buyer litigation.”
NATURE AND SOURCES OF OPPOSITION:
Adam J. Olshan, President, Connecticut Creditor Bar Association: states that the CCBA strongly opposes this bill as drafted. Mr. Olshan states, “The goal outlined in HB 6173 is to make Connecticut's court process and pleadings more understandable and for self-represented consumers. This goal has already been achieved by new 2011 court rules that followed collaborative bench-bar discussions held by local consumer attorneys, local creditor attorneys, local judges and local court clerks.” He describes ways in which these new court rules better protect consumers, while also being fair to creditors, such as the full itemization of debts in pleading, making sure the CT statute of limitations is current, and modifying the courtroom process to be sure that the proceedings were fully understood by self-represented parties.
Greg Bachand, debt collection attorney, Bachand & Bachand: believes that the debt collection process is a bulwark of our financial system, and that any adjustments to this process must be thoroughly considered, in order to avoid any unintended consequences. He believes that expanding the CT Creditor Collection Practice to include all consumer collection agencies would be redundant and would bring about unwanted consequences. He states “To include a collection agency as a creditor will enable the collection agency to bring suit in their own name, effectively short circuiting two of the important 'steps' in the process. This bill thus hurts consumers, rather than helps them.”
Renée Cannella, Attorney, The Cannella Law Firm, LLC: states that the language within the bill would be redundant and ambiguous because of numerous safeguards already in place. She states, “There are rules currently in place which are definitive about pleading the statute of limitations, about what is required to obtain a default judgment, and about what kind of documents are necessary to support a claim.” She believes that the rules which are in place are much less ambiguous and effective than the proposals within this bill, and are sufficient.
Houston Putnam Lowry, attorney, Brown & Welsh, P.C.: asks a series of questions concerning the scope and specificity of the proposed legislation. He believes that having pleading requirements coded into law instead of the Practice Book is imprudent. He believes that consumer collection agencies are already adequately regulated by the General Statutes, and that the bill does not correct an existing problem.
Linda Strumpf, Attorney at Law, Connecticut Creditor Bar Association: states that the bill is “superfluous, duplicative, and would simply cause confusion without having any benefit.” She discusses the vague nature of the language of the bill, which may be harmful to small businesses that attempt to collect legitimate debts. She notes that the CT Practice Book requires all debt buyers to produce full bills of sale from the original owner of the debt, and also requires a contract if any additional fees are involved. She believes that there is no need for more law in this area, and that the current rules contain sufficient safeguards for consumers.
Russell London, attorney, London & London: believes that the bill is not currently needed, that it is unnecessarily vague, and may impose additional, undue and punitive burdens on creditors trying to collect on debts which are legitimate. He notes that under the federal Fair Debt Collections Practices Act, if any debt is disputed, within the allotted notice period, the existence of the debt must be verified in order to begin legal action. It is his belief that the state already provides sufficient protection in the litigation process of debt collection. He states, “Given the plethora of federal regulation which already infuses virtually every segment of the collections industry, more regulation, particularly at the state level, is not needed at this point.”
Reported by: Stephen Hanshaw