|On July 13, 2021, the City Council of the District of Columbia passed emergency legislation to amend its debt collection law, § 28-3814. The amendments take effect when they are signed by D.C.’s mayor, which is expected any day. (The mayor has 10 days to sign.) The emergency measure will last 90 days from enactment. A “temporary” bill was also introduced that contains the same provisions. It has not passed the Council but is scheduled to be considered later and likely before the emergency measure would expire. The temporary measure would last 225 days from enactment if it were to become law.|
The emergency legislation largely continues amendments passed under previous temporary legislation that was set to expire, such as expanding coverage to include open-end and medical debt.
Key points of the emergency legislation passed by Council yesterday are:
- It adds a definition for “debt buyer” (“a person or entity that is engaged in the business of purchasing charged-off consumer debt or other delinquent consumer debt for collection purposes, whether it collects the debt itself or hires a third party for collection, including an attorney, in order to collect such debt. A debt buyer is considered a debt collector for all purposes”).
- It restricts creditors and debt collectors (which includes debt buyers) from “communicating with the consumer or any member of the consumer’s family or household . . .in excess of three phone calls, inclusive of all numbers the debt collector has for the consumer, in any 7-day period.”
- Previously, a creditor or debt collector could communicate with a debtor’s relative or family member if a member of debtor’s household; this is now prohibited unless through proper legal action or at the express and unsolicited request of the relative or family member.
- In addition to providing the name and business address of the person to whom a claim has been assigned for collection, the assignee’s phone number and email address must now be included.
- Creditors and debt collectors are now expressly prohibited from bringing suit to collect a debt that is beyond the statute of limitations, attaching or garnishing exempt funds or attempting to collect decedent debt from unobligated persons.
- Payments or oral affirmations made by a consumer after expiration of the statute of limitations will not extend the limitations period.
- A debtor must be provided any payment schedule or settlement agreement within seven days and is not required to make any payment until provided.
- The statue of limitations is three years for any consumer debt (“money or its equivalent, or a loan or advance of money, which is, or is alleged to be, more than 30 days past due and owing, unless a different period is agreed to by the debtor, as a result of a purchase, lease, or loan of goods, services, or real or personal property for personal, family, medical, or household purposes”). There are no exceptions unless a statute of limitations of the District provides a shorter limitations period.
- The data and document requirements are applicable to all debt collectors. They require debt collectors to have in their “possession”:
- “Documentation of the name of the original creditor as well as the name of the current creditor or owner of the consumer-debt;
- “The debtor’s last account number with the original creditor;
- “A copy of the signed contract, signed application, or other documents that provide evidence of the consumer’s liability and the terms thereof;
- “The date that the consumer debt was incurred; provided, that in the case of a revolving credit account, the date that the consumer debt was incurred shall be the last extension of credit made for the purchase of goods or services, for the lease of goods, or as a loan of money;
- “The date and amount of the last payment by the consumer, if applicable; and
- “An itemized accounting of the amount claimed to be owed, including the amount of the principal; the amount of any interest, fees or charges; and whether the charges were imposed by the original creditor, a debt collector, or a subsequent owner of the debt.
- “If the debt arises from a credit card, the account shall include copies of the last twenty-four (24) periodic statements required by the Truth in Lending Act, 15 U.S.C. § 1637(b), that evidence the transactions, purchases, fees and charges that comprise the debt.”
- Debt collectors must also “provide” this information to the consumer, in writing, within five days of the initial communication. The consumer is not required to ask (in writing or orally) for the information. It must be provided regardless of whether the consumer requests it. Further, debt collectors must “cease all collection of the consumer debt until such information is provided.” “Provide” or “provided” is not defined and it is unclear whether this can be interpreted to mean the same as “send” or “sent.”
- Any collection complaint must include all of the same information above, authenticated, plus:
- A statement of the type of consumer debt;
- The basis for any interest, fees, or request for attorney’s fees;
- Proof of ownership of the debt and of the chain of title; and
- A statement that suit was filed within the applicable statute of limitations.
- If a debt buyer, and only a debt buyer, fails to include data and documents required by the amendments in connection with a collection lawsuit, the debt buyer’s complaint will be dismissed with prejudice.
- The law now allows recovery of actual damages for any violation. The permanent law allows an aggrieved party to recover actual damages only for “willful” violations.
- Debt buyers, and only debt buyers, who violate the law shall be liable for “actual damages” and, of course, costs and attorney’s fees.
- In addition, debt buyers, and only debt buyers, shall be liable for punitive damages. This is likely the only law that requires the imposition of punitive damages for technical, innocent, and non-willful violations.
- The emergency amendments also allow for statutory damages of “not less than $500 per violation and not to exceed $4,000 per violation.” Oddly, as opposed to punitive damages, statutory damages are discretionary.
- Although the wording of the bills is unclear there is the potential that in the case of a class action, a debt buyer (and only a debt buyer) can be liable for statutory damages of between $500 and $4,000 for each class member.
- If the creditor, debt buyer or debt collector prevails in a collection lawsuit, attorneys fees specified as a percentage are allowed up to 15% of the amount of the debt or, if not specified, the lesser of 15% of the amount of the debt or actual attorney’s fees calculated at a reasonable rate for a reasonable amount of time.
- A violation of the FDCPA constitutes a violation of the D.C. law.
- Numerous other restrictions apply during a public health emergency and for 60 days thereafter except with respect to collecting debt owed to the District.
The legislation was introduced by D.C. Council Chairman Phil Mendelson. It was written in collaboration with D.C. Attorney General Karl A. Racine according to a press release issued by his office. Earlier this year AG Racine’s staff was engaged by RMAI to discuss debt buying and raised no issues concerning debt buyers. RMAI is considering various options to combat the legislation.
The penalties applicable only to debt buyers pose substantial risk. RMAI encourages its members to consider these risks before engaging in further activities in the District, if the emergency or temporary legislation become law.
RMAI Webinar Delivers More Information
Register now for the RMAI DC Emergency Legislation webinar on Tuesday, July 20, 2021, 10:00 AM PT / 1:00 PM ET. The live webinar will also be recorded, and both are free to RMAI members.