- State Updates: Iowa, Maryland, New York, Oregon, Minnesota
- Industry Action: Massachusetts
- RMAI COVID-19 Resources
State Updates: As States Extend State of Emergency Orders, Debt Collection Remains in Focus
As previously reported, on April 24, 2020, the Governor of Iowa extended the State of Public Health Disaster Emergency in response to the ongoing state of the COVID-19 pandemic. This week, the F.A.Q. Regarding Suspension of Garnishments clarified that the intent of the April 24, 2020, proclamation was to stop new garnishments, but not impact garnishments that were already underway.
A special shout out to Cara Lausen, RMAI’s state legislative chair in Iowa, who reached out to her contacts in Iowa State government, including the Governor’s office to get a much needed clarification on the April 24th Order on garnishments. This is a classic example of grassroots advocacy. The more time we spend developing personal relationships with our elected officials, the more effective the industry will be in our advocacy efforts.
On April 29, 2020, Governor Larry Hogan signed an executive Order prohibiting the garnishment of federal stimulus checks given out through the CARES Act due to the coronavirus pandemic. Under the Order, effective immediately, checks are protected from financial and banking institutions, as well as credit unions. The Order does not apply to garnishment relating to child support payments. Click here to review the Governor’s Order.
So, what does this mean? Like other states that have implemented Orders to protect stimulus payments from garnishment actions, debt buyers, debt collectors and collection attorneys should determine if they currently have garnishment orders in effect. This is because Maryland’s garnishment prohibition appears to impact both garnishments currently in effect as well as new garnishment orders.
In response to the COVID-19 public health emergency, the State of New York expanded its court system to include “virtual” court operations. Though the intent of adopting virtual courts throughout the state was well intentioned and designed to make the court system more accessible, the change has also caused widespread confusion over the handling and transmission of digitized documents. To resolve any ambiguity as to how and when digital documents may be used in a virtual court environment, the Chief Judge overseeing the operation of the State of New York’s Unified Court System (UCS) initiated a new program to allow for the transmission of digitized documents (in PDF format).
Effective May 4, 2020, and continuing for an indefinite period, users of the state’s Electronic Document Delivery System may now (1) enter basic information about a matter on a UCS webpage portal page; (2) upload one or more pdf documents; and (3) send those documents electronically to a court or clerk selected by the user. Upon receipt of the document(s) by the court, the sender will receive an email notification, together with a unique code that identifies the delivery. If the sender does not receive an email from the system confirming receipt of the documents, this means the documents were NOT received. For more information click here:
So, what does this mean? If successful, the new system will reduce the need for delivery or filing of paper copies of documents with the courts—and thereby minimize foot traffic during the COVID-19 public health emergency. It will also facilitate the court system’s expanded virtual court operations, which rely upon digital documents. However, the new system will not constitute service of process on the opposing party. Nor will it substitute or replace filing under the New York State Courts Electronic Filing System (NYSCEF). Therefore, it should not be used in matters where NYSCEF is available on either a mandatory or consensual basis.
On April 30, 2020, the Oregon Department of Consumer and Business Services Division of Financial Regulation issued Guidance Bulletin No. DFR 2020-14, encouraging the use of reasonable measures when collecting consumer debt during the during the COVID 19 outbreak. The Guidance Bulletin applies to debt buyers required to be licensed under ORS 646A.640 to 646A.692 and all collection agencies required to be registered under ORS 697.005 to 697.095. Specifically, it encourages licensees to:
- Be willing to accommodate debtors who have stated that they have hardships resulting from the outbreak;
- Offer payment accommodations;
- Waive late payment fees or online payment fees;
- Waive nonsufficient funds fees or reduce them to match out-of-pocket costs;
- Temporarily suspend collection activities for debtors who have significant financial or medical hardship;
- If you suspend activity on one account of a debtor, suspend activity on all accounts of that debtor;
- Stop collection activity against debtors with no access to assets whose only source of income is an exempt source, such as Social Security.
So, what does this mean? The Guidance Bulletin does not have the force and effect of law. Nor does it grant the state power to bring an action against a debt buyer or collection agency for its failure to adhere to the recommended practices. However, it does make clear, collection activity during the pandemic that does not include the recommended practices would be considered unreasonable. This is precisely the kind of state action consumer attorneys use as the fodder for class actions against debt buyers and debt collectors under the unfair practices section of the Fair Debt Collection Practices Act.
Not to be outdone by other Governors, on May 4, 2020, the Governor of Minnesota issued an Emergency Executive Order 20-50 to protect stimulus funds, student loan borrowers’ wages and tax refunds, CARES Act payments and other emergency governmental payments from garnishment and other legal actions during the COVID-19 Peacetime Emergency. Click here for more information.
The Order halts all garnishment proceedings in effect, prohibits the filing of new garnishment actions and prohibits the interception of stimulus payments relating to COVID-19 to be used by third parties or immediately garnished for consumer debt incurred before the COVID-19 pandemic. It also halts all prejudgment garnishment actions and supplementary proceedings. Consumer debt in this context refers to natural persons whose debt originated from the purchase of goods or services purchased primarily for a personal, family, or household purpose, and not for a commercial, agricultural, or business purpose.
This Order will remain in effect until the termination of the state of COVID-19 emergency in the State of Minnesota or otherwise rescinded by the proper authority.
So, what does this mean? As a practical matter, all garnishment proceedings in effect today are no longer in place and new garnishment actions cannot be filed. All emergency governmental payments are exempt from garnishment or any other proceeding to satisfy a consumer debt including Federal payments and those that may be paid out by state, local, or tribal governments. The exemption does not extend to attachments related to domestic support. Nothing in the Governor’s Order prohibits a consumer from choosing to use emergency governmental funds to satisfy a debt. However, debt buyers and debt collectors who accept such funds in payment are well advised to remind the consumer the debt buyer or debt collector does not have the right to garnish, attach or take such monies in payment and the decision to use funds to satisfy the debt are totally voluntary.
Industry Action: Massachusetts
On May 6, 2020, Judge Richard Stearns of the Federal District Court for the District of Massachusetts granted ACA International’s motion for a temporary restraining order and preliminary injunction in a lawsuit challenging Massachusetts Attorney General Maura T. Healey’s emergency Order that stops outbound collections calls for 90 days. The regulation, codified at 940 CMR 35:00, has been in effect since March 26, 2020, and among other prohibitions, restricted third party debt collectors from making any and all outbound calls to Massachusetts debtors in connection with the collection of a debt.
The reason ACA International filed an action seeking a temporary restraining Order and preliminary injunction enjoining the Attorney General of Massachusetts from enforcing 940 CMR 35.00, “Unfair and Deceptive Debt Collection Practices During the State of Emergency Caused by COVID-19” was grounded in its position:
- the emergency Order violates the constitutionally protected, commercial free speech rights of its members who collect consumer debt in the state of Massachusetts;
- the association would likely prevail on the merits of its claims; and
- some of its Massachusetts members will be irreparably harmed by the Regulation as it effectively prohibits them from conducting their businesses in the Commonwealth with the likely result of bankruptcy.
So, what does this mean? As the name of the action implies, this win on the temporary restraining order may in fact be very short lived. In the meantime, outbound collection calls to consumers are permissible in the state of Massachusetts. But for every action there is a reaction and this maxim holds true in the law. In response to the Court’s ruling on the temporary restraining order and the injunction, the attorney general may decide to withdraw the current emergency Order in its entirety and replace it with yet another. She may do so for two reasons. First, to arguably satisfy the Court’s concerns about protecting the commercial speech rights of debt collectors, and second, to curtail the collection of consumer debt during the state of the COVID-19 emergency in the interest of protecting the citizens of the Commonwealth. It is also possible the Massachusetts’s state legislature will pass emergency legislation to curtail the collection of consumer debt during the state of the COVID-19 emergency. In either scenario, the issue is worthy of close monitoring. RMAI will advise its members of any developments in the case as they are made available.
RMAI COVID-19 Resources
RMAI’s Commitment to Consumers and FAQs. The communication is posted in the Resources for Businesses, Employers and Consumers section of the COVID-19 resource page as well as on the Consumers page of the RMAI website.