DBA Works to Ensure Balanced Legislation Without Barriers to the Collection of Legitimate Debt

Once deemed one of the most toxic pieces of legislation the industry faced in 2016, the soon-to-be signed Connecticut HB 5571 (pages 97-107) is a mere shadow of its former self as a result of the work of DBA International’s State Legislative efforts and collaboration with the Connecticut Creditor’s Bar.

While the anticipated change in Connecticut’s Consumer Collection Agency Licensure Act will impact the litigation of consumer debt, the changes should be fairly manageable as many of the requirements mirror existing requirements within the Connecticut court rules.  However, companies litigating on Connecticut accounts will need to address several operational changes prior to the bill’s effective date of October 1, 2016. The requirements apply prospectively and do not apply to any debt collection action commenced prior to October 1, 2016. Among other things, the bill will:

  • Expand the definition of “consumer collection agency” to include the activity of “collecting or receiving . . . federal income tax payments” and provides conforming statutory changes.
  • Prohibit creditors and debt buying companies from initiating litigation in a consumer debt collection matter after the statute of limitations has expired and prohibiting any payments made after the statute has expired from extending the limitations period.
  • Require debt buying companies that initiate litigation on a consumer account to file with the court evidence in accordance with the rules of the Superior Court that:
  • Establishes the “amount and nature” of the debt prior to a court’s entry of judgment. In the case of a default judgment, the plaintiff debt buyer must provide this in the form of a sworn affidavit with attached documentation. If the debt is associated with a credit card, the following documents shall be sufficient: (i) last activity statement, (ii) charge-off statement, (iii) one additional monthly statement prior to charge-off (for debt purchased after 10/1/16), and (iv) post-charge-off itemization of the balance if the balance is different from the charge-off amount
  • Establishes the debt buyer as the owner of the account, which includes the name, address, and dates of ownership of each owner and a copy of each assignment or other documentation that establishes an unbroken chain of ownership of the debt by the plaintiff. In the case of a default judgment, the plaintiff debt buyer must provide this in the form of a sworn affidavit.
  • Contains the name of the consumer debtor and the original or charge-off account number.
  • Redact items provided to the court as long as redacted material is clearly indicated by either blacking out the text or otherwise indicating in writing on such document that text has been redacted.
  • Additionally, creditors and consumer collection agencies will be prohibited from bringing suit and reviving the statute of limitations after the expiration of the statute.

This bill overwhelmingly passed both houses of the legislature and is awaiting the Governor’s signature which is expected within the next two weeks.

A Winning Team and Approach
DBA International took a leadership role by partnering with  a top lobbyist, led multiple calls, provided red lines to the bill sponsor and sent staff to Connecticut to meet with key members of the legislature. In particular, DBA and the Connecticut Creditor’s Bar worked closely together during bill negotiations resulting in a number of provisions being deleted from the bill including: (1) requiring a signed writing in order to be able to collect on interest, fees, or charges post-default; (2) requiring a copy of the contract and assignment to be attached to the complaint; (3) ability to invalidate old judgments based on new statutory requirements; (4) mandating pre-charge-off itemization of the debt; (5) requiring 18 months of consumer account statements; (6) maintaining a privilege log; (7) requiring specific and confidential account related information be provided to the consumer within five business days after the initial FDCPA communication; and (8) subjecting consumer collection agencies to a state-level private right of action. This is another example of DBA working on members’ behalf to protect and promote the debt buying industry.
 
 
This Alert is intended for Members of DBA International and is for informational purposes only and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.