If the National Association of Retail Collection Attorneys (NARCA) gets its way, Congress will soon amend the Fair Debt Collection Practices Act (FDCPA) to exempt debt collection attorneys from having to obey the law during litigation.
The bill, titled "To amend the Fair Debt Collection Practices Act to preclude law firms and licensed attorneys from the definition of a debt collector when taking certain actions," is awaiting hearing by the House Financial Services Committee. The actual text of the bill is not yet public, but if the bill proposed by NARCA last year is any indication, it will read:
…The term (debt collector) does not include –
According to Lou Freedman, president of NARCA, this language is merely a "technical amendment to the law."
No it is not.
Because the FDCPA only applies to "debt collectors," amending the FDCPA to exempt collection attorneys from being "debt collectors" during lawsuits creates essentially floor-to-ceiling liability protection for collection firms when performing their most powerful and consequential function. Large firms like Messerli & Kramer, Wilford Geske & Cook, Gurstel Chargo, and Winthrop & Weinstine, all of which devote significant resources to debt collection lawsuits, would be placed outside the purview of federal law for the focal portion of their collection activities. Consumer recourse for the myriad of FDCPA violations collection firms can commit during a lawsuit would be limited to ethics board claims and whatever standing they can scrape together on which to sue under the patchwork of state collection laws. Any reservations a firm may have about, say, alleging an incorrect dollar amount, would be tempered by the fact that there would be no federal case against them for misrepresenting the amount of the debt. As a result, collection firms would spend less time ensuring the accuracy of their information and claims.
If the amendment passes, these lawsuits will be bolder and more numerous. Suing out rather than settling will be collection firms' safest option. As the already-overburdened court system absorbs the influx of new cases, the cost of the debt collection industry to consumer and taxpayer alike will go up (filing and answering a lawsuit in Hennepin County District Court, for example, each cost $322; litigating a case will involve motion fees and jury fees; each of these transaction fees adds friction to the process and increases the cost of debt to consumers). The number of uncontested default judgments, which are common results of collection suits, would rise by sheer inertia with the increase in suits. This would be the case across the country.
Let's be absolutely clear: this is not a routine, house-keeping update to the law: this amendment if passed would drastically change the coverage of the FDCPA, would increase the cost of debt to consumers, and would provide safe harbor and windfall for debt collection law firms, which are already in a tremendous position of power over the debtors they live on.
Unfortunately for NARCA, passing the amendment requires the cooperation of Congress. Best of luck there.
The attorneys of Drewes Law have access to post and edit the blogs. Attorney Bios.