House Passes Debt Collection Bill

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The House Thursday passed legislation making a series of reforms to debt collection requirements. While NAFCU supports efforts to stop abusive debt collection practices, the association had raised concerns about language contained in the bill that would expand the definition of a “debt collector” and increase risks to lenders.

The bill, the Comprehensive Debt Collection Improvement Act, passed the House by a vote of 215-207. It now heads to the Senate for consideration.

Earlier this week, NAFCU joined with other financial services industry trades flagged concerns about the legislation overturning a Supreme Court ruling that determined “entities enforcing a security interest without also seeking repayment or deficiency judgment generally do not qualify as debt collectors under the Fair Debt Collection Practices Act (FDCPA).” The decision also clarified that businesses engaged in non-judicial foreclosure proceedings are not debt collectors under the FDCPA.

The trades noted that a majority of states have structured their legal systems to allow for non-judicial foreclosures, “which maintain significant state and federal procedural protections for borrowers while streamlining the foreclosure process.” This reduces potential costs and delays associated with litigation, while balancing the needs of borrowers and benefits to communities.

Should this legislation be enacted, the trades argued that it “would disrupt the choices states have made in structuring their foreclosure regimes, imposing unnecessary costs and delay to the enforcement of real property interests and subsequently increasing the cost of credit.”

NAFCU will continue to advocate against proposals that would hamper legitimate debt collection efforts and increase costs for all parties involved.