U.S. House Passes Comprehensive Debt Collection Improvement Act
On May 13, 2021, the U.S. House of Representatives passed H.R. 2547 (the “Comprehensive Debt Collection Improvement Act” or “CDCIA”). Originally introduced by House Financial Services Chairwoman Maxine Waters, the CDCIA’s primary purpose is to provide additional financial protections for consumers and place restrictions on debt collection activities by amending several consumer finance statutes.
Specifically, the notable changes the CDCIA seeks to enforce include, in part:
- Amending the Truth in Lending Act (“TILA”) to prohibit the use of cognovits or confessions of judgment for small business owners as an unfair credit practice;
- Amending the Fair Debt Collection Practices Act (“FDCPA”) to regulate communications with servicemembers and prohibit debt collectors from threatening such parties (i.e., threats to reduce rank or revoke security clearance);
- Amending TILA to require the discharge of private student loans where a borrower has become permanently disabled;
- Amending the FDCPA to provide a two-year waiting period before an entity can collect or attempt to collect a medical debt;
- Amending the Fair Credit Reporting Act (“FCRA”) to prohibit the credit reporting of a debt arising from any “medically necessary procedure” and requiring the provision of prior notice of rights to a consumer before furnishing information regarding the medical debt of a consumer to a consumer reporting agency;
- Amending the FDCPA to prohibit a debt collector from contacting a consumer electronically, including by email, text message, and direct message through social media, without a consumer’s prior consent;
- Amending the FDCPA to include a loan, overpayment, fine, penalty, restitution, fee, or other money owed to a federal, state, or local government as “debt” subject to the FDCPA;
- Amending the FDCPA to expand coverage over entities involved in non-judicial foreclosure proceedings; and
- Prohibiting servicers of private education loans from reporting an adverse item of information relating to the nonpayment of the loan for an established period of time
Overall, the CDCIA’s proposed changes to consumer finance laws tend to support pro-consumer policies and will require financial institutions, debt collectors, and loan servicers to re-evaluate their business practices if the bill is ultimately passed. With the CDCIA’s passage by a 215-207 vote in the House of Representatives (largely divided among party lines), it remains to be seen if an evenly split Senate will pass the bill’s widespread changes to the consumer finance industry and whether Vice President Kamala Harris’s tie-breaking vote will come into play.