Connecticut Seal

General Assembly

 

Substitute Bill No. 5571

    February Session, 2016

 

*_____HB05571BA____031616____*

AN ACT CONCERNING CONSUMER COLLECTION AGENCIES AND DEBT COLLECTION ACTIONS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-800 of the 2016 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

As used in [sections 36a-800] this section and sections 36a-801 to 36a-812, inclusive, as amended by this act, unless the context otherwise requires:

(1) "Branch office" means a location other than the main office at which a licensee or any person on behalf of a licensee acts as a consumer collection agency;

(2) "Consumer collection agency" means any person (A) engaged as a third party in the business of collecting or receiving [for] payment for others [of] on any account, bill or other indebtedness from a consumer debtor, (B) engaged directly or indirectly in the business of collecting on any account, bill or other indebtedness from a consumer debtor for such person's own account if the indebtedness was acquired from another person and if the indebtedness was either delinquent or in default at the time it was acquired, or (C) engaged in the business of collecting or receiving [for payment property] tax payments, including, but not limited to, property tax and federal income tax payments, from a property tax debtor or federal income tax debtor on behalf of a municipality or the United States Department of Treasury, including, but not limited to, any person who, by any device, subterfuge or pretense, makes a pretended purchase or takes a pretended assignment of accounts from any other person, [or] municipality or taxing authority of such indebtedness for the purpose of evading the provisions of [sections 36a-800] this section and sections 36a-801 to 36a-812, inclusive, as amended by this act. [It] "Consumer collection agency" includes persons who furnish collection systems carrying a name which simulates the name of a consumer collection agency and who supply forms or form letters to be used by the creditor, even though such forms direct the consumer debtor, [or] property tax debtor or federal income tax debtor to make payments directly to the creditor rather than to such fictitious agency. "Consumer collection agency" further includes any person who, in attempting to collect or in collecting such person's own accounts or claims from a consumer debtor, uses a fictitious name or any name other than such person's own name which would indicate to the consumer debtor that a third person is collecting or attempting to collect such account or claim. "Consumer collection agency" does not include (i) an individual employed on the staff of a licensed consumer collection agency, or by a creditor who is exempt from licensing, when attempting to collect on behalf of such consumer collection agency, (ii) persons not primarily engaged in the collection of debts from consumer debtors who receive funds in escrow for subsequent distribution to others, including, but not limited to, real estate brokers and lenders holding funds of borrowers for payment of taxes or insurance, (iii) any public officer or a person acting under the order of any court, (iv) any member of the bar of this state, (v) a person who services loans or accounts for the owners thereof when the arrangement includes, in addition to requesting payment from delinquent consumer debtors, the providing of other services such as receipt of payment, accounting, record-keeping, data processing services and remitting, for loans or accounts which are current as well as those which are delinquent, (vi) a bank or out-of-state bank, as defined in section 36a-2, and (vii) a subsidiary or affiliate of a bank or out-of-state bank, provided such affiliate or subsidiary is not primarily engaged in the business of purchasing and collecting upon delinquent debt, other than delinquent debt secured by real property. Any person not included in the definition contained in this subdivision is, for purposes of sections 36a-645 to 36a-647, inclusive, a "creditor", as defined in section 36a-645;

(3) "Consumer debtor" means any natural person, not an organization, who has incurred indebtedness or owes a debt for personal, family or household purposes, including current or past due child support, [or] who has incurred indebtedness or owes a debt to a municipality due to a levy by such municipality of a personal property tax or who has incurred indebtedness or owes a debt to the United States Department of Treasury under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time;

(4) "Creditor" means a person, including, but not limited to, a municipality or the United States Department of Treasury, that retains, hires, or engages the services of a consumer collection agency;

(5) "Federal income tax" means all federal taxes levied on the income of a natural person or organization by the United States Department of Treasury under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time;

(6) "Federal income tax debtor" means any natural person or organization who owes a debt to the United States Department of Treasury;

[(5)] (7) "Main office" means the main address designated on the application;

[(6)] (8) "Municipality" means any town, city or borough, consolidated town and city, consolidated town and borough, district as defined in section 7-324 or municipal special services district established under chapter 105a;

[(7)] (9) "Organization" means a corporation, partnership, association, trust or any other legal entity or an individual operating under a trade name or a name having appended to it a commercial, occupational or professional designation;

[(8)] (10) "Property tax" has the meaning given to the term in section 7-560; and

[(9)] (11) "Property tax debtor" means any natural person or organization who has incurred indebtedness or owes a debt to a municipality due to a levy by such municipality of a property tax.

Sec. 2. Subsection (a) of section 36a-801 of the 2016 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) No person shall act within this state as a consumer collection agency unless such person has first obtained a consumer collection agency license for such person's main office and each branch office where such person's business is conducted. A consumer collection agency is acting within this state if it (1) has its place of business located within this state; (2) has its place of business located outside this state and (A) collects from consumer debtors, [or] property tax debtors or federal income tax debtors who reside within this state for creditors who are located within this state, or (B) collects from consumer debtors, [or] property tax debtors or federal income tax debtors who reside within this state for such consumer collection agency's own account; (3) has its place of business located outside this state and regularly collects from consumer debtors, [or] property tax debtors or federal income tax debtors who reside within this state for creditors who are located outside this state; or (4) has its place of business located outside this state and is engaged in the business of collecting child support for creditors located within this state from consumer debtors who are located outside this state.

Sec. 3. Subsection (a) of section 36a-802 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) No such license and no renewal thereof shall be granted to a third party consumer collection agency unless the applicant has filed with the commissioner a bond to the people of the state in the penal sum of twenty-five thousand dollars, approved by the Attorney General as to form and by the commissioner as to sufficiency of the security thereof. Such bond shall be conditioned that such licensee shall well, truly and faithfully account for all funds entrusted to the licensee and collected and received by the licensee in the licensee's capacity as a consumer collection agency. Any person who may be damaged by the wrongful conversion of any creditor, consumer debtor, [or] property tax debtor or federal income tax debtor funds received by such consumer collection agency may proceed on such bond against the principal or surety thereon, or both, to recover damages. The commissioner may proceed on such bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon the licensee pursuant to subsection (a) of section 36a-50. The proceeds of the bond, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of such claimants against the licensee in the event of bankruptcy of the licensee and shall be immune from attachment by creditors and judgment creditors. The bond shall run concurrently with the period of the license granted to the applicant, and the aggregate liability under the bond shall not exceed the penal sum of the bond.

Sec. 4. Subsection (a) of section 36a-805 of the 2016 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) No consumer collection agency shall: (1) Furnish legal advice or perform legal services or represent that it is competent to do so, or institute judicial proceedings on behalf of others; (2) communicate with consumer debtors, [or] property tax debtors or federal income tax debtors in the name of an attorney or upon the stationery of an attorney, or prepare any forms or instruments which only attorneys are authorized to prepare; (3) receive assignments as a third party of claims for the purpose of collection or institute suit thereon in any court; (4) assume authority on behalf of a creditor to employ or terminate the services of an attorney unless such creditor has authorized such agency in writing to act as such creditor's agent in the selection of an attorney to collect the creditor's accounts; (5) demand or obtain in any manner a share of the proper compensation for services performed by an attorney in collecting a claim, whether or not such agency has previously attempted collection thereof; (6) solicit claims for collection under an ambiguous or deceptive contract; (7) refuse to return any claim or claims upon written request of the creditor, claimant or forwarder, which claims are not in the process of collection after the tender of such amounts, if any, as may be due and owing to the agency; (8) advertise or threaten to advertise for sale any claim as a means of forcing payment thereof, unless such agency is acting as the assignee for the benefit of creditors; (9) refuse or fail to account for and remit to its clients all money collected which is not in dispute within sixty days from the last day of the month in which said money is collected; (10) refuse or intentionally fail to return to the creditor all valuable papers deposited with a claim when such claim is returned; (11) refuse or fail to furnish at intervals of not less than ninety days, upon the written request of the creditor, claimant or forwarder, a written report upon claims received from such creditor, claimant or forwarder; (12) add any post charge-off charge or fee for cost of collection, unless such cost is a court cost, to the amount of any claim which it receives for collection or knowingly accept for collection any claim to which any such charge or fee has already been added to the amount of the claim unless (A) the consumer debtor is legally liable for such charge or fee as determined by the contract or other evidence of an agreement between the consumer debtor and creditor, a copy of which shall be obtained by or available to the consumer collection agency from the creditor and maintained as part of the records of the consumer collection agency or the creditor, or both, and (B) the total charge or fee for cost of collection does not exceed fifteen per cent of the total amount actually collected and accepted as payment in full satisfaction of the debt; (13) use or attempt to use or make reference to the term "bonded by the state of Connecticut", "bonded" or "bonded collection agency" or any combination of such terms or words, except [that] the word "bonded" may be used on the stationery of any such agency in type not larger than twelve-point; (14) when the debt is beyond the statute of limitations, fail to provide the following disclosure in type not less than ten-point informing the consumer debtor in its initial communication with such consumer debtor that (A) when collecting on debt that is not past the date for obsolescence provided for in Section 605(a) of the Fair Credit Reporting Act, 15 USC 1681c: "The law limits how long you can be sued on a debt. Because of the age of your debt, (INSERT OWNER NAME) will not sue you for it. If you do not pay the debt, (INSERT OWNER NAME) may report or continue to report it to the credit reporting agencies as unpaid"; and (B) when collecting on debt that is past the date for obsolescence provided for in Section 605(a) of the Fair Credit Reporting Act, 15 USC 1681c: "The law limits how long you can be sued on a debt. Because of the age of your debt, (INSERT OWNER NAME) will not sue you for it and (INSERT OWNER NAME) will not report it to any credit reporting agencies."; [or] (15) notwithstanding any other provision of law, demand, add, impose or obtain in any manner any interest, fee, charge or expense incidental to the principal obligation for collection from the consumer debtor; or (16) engage in any activities prohibited by sections 36a-800 to 36a-812, inclusive, as amended by this act.

Sec. 5. Subsection (b) of section 36a-811 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(b) Each third party consumer collection agency shall deposit funds collected or received from consumer debtors for payment for others on an account, bill or other indebtedness in one or more trust accounts maintained at a federally insured bank, Connecticut credit union, federal credit union or an out-of-state bank that maintains in this state a branch as defined in section 36a-410, which accounts shall be reconciled monthly. Such funds shall not be commingled with funds of the consumer collection agency or used in the conduct of the consumer collection agency's business. Such account shall not be used for any purpose other than (1) the deposit of funds received from consumer debtors, (2) the payment of such funds to creditors, (3) the refund of any overpayments to be made to consumer debtors, and (4) the payment of earned fees to the consumer collection agency, which shall be withdrawn on a monthly basis. Except for payments authorized by subdivisions (2) to (4), inclusive, of this subsection, any withdrawal from such account, including, but not limited to, any service charge or other fee imposed against such account by a depository institution, shall be reimbursed by the consumer collection agency to such account not more than thirty days after the withdrawal. Funds received from consumer debtors shall be posted to their respective accounts in accordance with generally accepted accounting [practices] principles.

Sec. 6. (NEW) (Effective October 1, 2016) In any cause of action initiated by a creditor, as defined in section 36a-645 of the general statutes, or by a consumer collection agency, as defined in section 36a-800 of the general statutes, as amended by this act, for a liability on debt owed by a consumer debtor, as defined in section 36a-645 of the general statutes, the creditor or consumer collection agency shall attach the following materials to the complaint:

(1) A copy of the contract or other documentation evidencing the original debt and containing a signature of the consumer debtor or, if the debt is credit card debt and no such signed documentation exists, copies of the documentation generated when the credit card was used; and

(2) A copy of the assignment or other documentation (A) establishing that the plaintiff creditor is the owner of the debt, (B) containing the original account number and name associated with the debt, and (C) if the debt has been assigned more than once, a copy of each assignment or other documentation that establishes an unbroken chain of ownership of the debt by the plaintiff creditor.

Sec. 7. (NEW) (Effective October 1, 2016) (a) For purposes of this section:

(1) "Charge-off" means the declaration by a creditor, as defined in section 36a-645 of the general statutes, that a debt is uncollectable and has been written off as a bad debt expense on the creditor's income statement and removed from its balance sheet; and

(2) "Privilege log" means a document that describes documents or other items withheld from production in a civil lawsuit in a manner that will enable other parties to assess the claim of privilege.

(b) In any cause of action initiated by a creditor or consumer collection agency, as defined in section 36a-800 of the general statutes, as amended by this act, for liability on debt owed by a consumer debtor, as defined in section 36a-641 of the general statutes, the creditor or consumer collection agency shall file evidence with the court to establish the amount and nature of the debt prior to entry of a default judgment or summary judgment against the consumer debtor by the court.

(c) The evidence presented by the creditor or consumer collection agency in accordance with subsection (b) of this section shall be duly authenticated and admissible in accordance with the rules of evidence and contain not less than the following items:

(1) The original account number associated with the debt;

(2) The identity of the original creditor, as defined in subparagraph (A) of subdivision (2) of section 36a-645 of the general statutes, to whom the debt is owed;

(3) The amount of the original debt;

(4) An itemization of charges and fees to be owed by the consumer debtor, including interest claimed on the debt and the basis for such interest;

(5) The original charge-off balance on the debt, if applicable;

(6) An itemization of post charge-off charges, if applicable;

(7) The date of the last payment by the consumer debtor, if applicable; and

(8) The names of all persons or entities that owned the consumer debt after the original creditor, if applicable.

(d) A creditor or consumer collection agency shall indicate when any of the items referenced in subsection (c) of this section have been redacted and submit a privilege log to the court.

(e) A creditor or consumer collection agency shall provide the items identified in subsection (c) of this section to the consumer debtor in writing not later than five business days after the initial communication with the consumer debtor and shall cease all collection of the debt owed by the consumer until such information is provided.

(f) No creditor or consumer collection agency shall initiate a cause of action to collect debt owed by a consumer when the debt collector knows or reasonably should know that the applicable statute of limitations on such cause of action has expired.

(g) Notwithstanding any other provision of law, when the applicable statute of limitations on a cause of action to collect debt owed by a consumer has expired, any subsequent payment toward or written or oral affirmation of the debt owed by the consumer shall not extend the limitations period within which the creditor or consumer debtor may bring the cause of action.

Sec. 8. Subsection (a) of section 36a-648 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) A creditor, as defined in section 36a-645, or consumer collection agency, as defined in section 36a-800, as amended by this act, who uses any abusive, harassing, fraudulent, deceptive or misleading representation, device or practice to collect or attempt to collect a debt in violation of section 36a-646, section 6 or 7 of this act or the regulations adopted pursuant to section 36a-647 shall be liable to a person who is harmed by such conduct in an amount equal to the sum of: (1) Any actual damages sustained by such person, (2) if such person is an individual, such additional damages as the court may award, not to exceed one thousand dollars, and (3) in the case of any successful action to enforce liability under the provisions of this subsection, the costs of the action and, in the discretion of the court, a reasonable attorney's fee.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2016

36a-800

Sec. 2

October 1, 2016

36a-801(a)

Sec. 3

October 1, 2016

36a-802(a)

Sec. 4

October 1, 2016

36a-805(a)

Sec. 5

October 1, 2016

36a-811(b)

Sec. 6

October 1, 2016

New section

Sec. 7

October 1, 2016

New section

Sec. 8

October 1, 2016

36a-648(a)

Statement of Legislative Commissioners:

In Section 1(2) "debtor" was inserted before "or federal income tax" in the first sentence for consistency with other provisions of the Subdiv. and for statutory consistency, and in Sec. 4(a)(15), "principle" was changed to "principal" for accuracy.

BA

Joint Favorable Subst.