Franken Introduces Bill to Amend FDCPA, Raise Fines for Violations

Hoping to end the use of arrest warrants by some consumer debt collectors, U.S. Senator Al Franken (D-Minn.) introduced a bill late Wednesday that would ban the practice and give consumers the right to seek court ordered protection in dealing with debt collectors.  The bill is co-sponsored by Republican Sen. George LeMieux of Florida.

The bill, S. 3888 — titled “The End Debt Collector Abuse Act” — is a series of proposed amendments to the Fair Debt Collection Practices Act (FDCPA) and would have broad sweeping implications for the accounts receivables management industry. The measure calls for more account detail from ARM firms using courts and proposes to raise the liability limit for FDCPA violations.

Franken’s bill was born out of recent Minneapolis Star Tribune news reports about debt collectors’ aggressive tactics, including a growing use of arrest warrants to jail consumers who missed court dates to reveal assets. The reports also included stories of collectors garnishing consumers’ paychecks or suing without proof.

“This bill will protect Minnesota consumers from abusive debt collectors who often exploit the loopholes in the law to make an extra buck,” Sen. Franken said Tuesday when he announced plans to introduce the bill. “Debt collectors often use deceptive and aggressive tactics, sometimes going after debts that have already been paid or even targeting the wrong person. This bill will protect consumers, keep debt collectors honest, and stop the misuse of law enforcement resources for private profit.”

But industry insiders said the bill doesn’t address the underlying problems with the FDCPA, including whether debt collectors can leave a message on voicemail and what information the message should contain.

“(Sen. Franken) has stated that he wants to strengthen FDCPA. It needs to be modernized. It needs to take into account the fact that it’s a 33-year old law, created before cell phones and the internet,” Lou Freedman, chair of the federal government affairs committee for the National Association of Retail Collection Attorneys (NARCA), told insideARM.com.

Franken’s FDCPA amendment proposals include a clause that would adjust the liability limit for violations of the act to inflation, in effect, increasing it every year.  When the FDCPA was enacted in 1977, the $1,000 liability limit did not have an adjustment provision, so the amount has remained static. Franken’s bill would index the limit to the Consumer Price Index, the key measure of inflation in the U.S.

The bill largely focuses on problems arising from purchased debt. For example, it calls for validation notices to debtors to include the name and address of the last person to extend the credit with respect to the debt being pursued. The validation notice should also include:

• The date of the last payment to the creditor by the consumer on the debt in question, as well as the amount of the debt at the time of the default
• An itemization of the principal, interest, fees and any other charges that make up the debt
• A description of the rights of the consumer
• The name and contact information of the person responsible for handing complaints on behalf of the debt collector.
• The bill also makes arrests and arrest warrants an unfair debt collections practice
• Require debt collectors to conduct thorough investigations when consumers dispute the debt
• Increase penalties on debt collectors who break the law to discourage them from employing bad practices, and allow judges to provide injunctive relief to consumers when debt collectors continue to violate their rights as specified under FDCPA.

Freedman said it’s important that legal collection professionals be able to provide consumers with proper verification of the amounts they are asked to collect. But he said Franken’s proposals are based upon anecdotal evidence and may have unintended consequences.

He noted such legislation would “give additional fuel to consumer lawyers to sue debt collectors over hyper-technical errors that occur in the debt collecting on process,” because FDCPA is a strict liability statute, while similar statutes are negligence-based. As a result, courts are asked to rule on whether a mistake occurred, not the reasons or intent behind it.

“The courts don’t really care how the mistake happened or why it happened,” Freedman said.

Franken’s bill is unlikely to be considered by the full Senate before the current session ends. But Freedman said federal regulators are likely to address FDCPA after the election, no matter which party is in control, and NARCA wants to have input.

“We want a dialogue with the consumer organizations and the Congressional committees rewriting FDCPA,” Freedman said. “We need an answer as to whether we can leave a message on an answering machine and what that message should be.”