Archives for April 2020

This article is part of the iA Think Differently series. Written by members of the iA Innovation Council, the series showcases thought leadership in analytics, communications, payments, and compliance technology for the accounts receivable management industry.

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I know that many collection agencies are scrambling to keep up with the changing state rules and client decisions about who is considered essential, whether agents can work remotely, and whether/under what circumstances you can engage in proactive outbound collection efforts. I have heard from numerous CEOs who say their main priority right now is keeping as many people employed as possible, for as long as possible.

I also know that so many public and private organizations are struggling to keep up with the increased volume of phone calls from consumers who need loans processed, unemployment claims processed, account information, public health information, or any number of other types of help.

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The collection industry has thousands of trained call center agents, many of whom are now set up to work from home, who are idle or soon may become idle because they are not allowed to engage in collection efforts. 

In addition to the roller coaster of changing rules I already mentioned, Members of Congress have proposed bills that, if passed, would put limitations on collection efforts for months following a declared disaster. 

Are you taking the time to think differently about the types of services you could provide and who your clients could be?

Could your agents be trained to take those overflow unemployment calls? Could they answer questions for local hospitals or health departments? Could they help with overflow calls from your local utility company? Could they take calls for the federal government? The IRS? The CDC? Do you know what else is going to be needed a lot in the coming weeks/months? Contact tracers. 

Professional collection agencies have a workforce of employees uniquely trained in matters of privacy, patience, empathy, and complex problem-solving. You are uniquely qualified to pivot in this chaotic time to provide a service that others can’t. If you haven’t done so already, I’d suggest giving this some serious consideration.

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Stephanie Eidelman is the CEO of insideARM and The iA Institute and leads the iA Innovation Council.

The iA Innovation Council is a collaborative working group of product, tech, strategy, and operations thought leaders at the forefront of analytics, communications, payments, and compliance technology. Group members meet in person (and lately, virtually) several times each year to engage in substantive dialogue and whiteboard sessions with the creative thinkers behind the latest innovations for the industry, the regulators who audit and establish guardrails for new technology, and educators, entrepreneurs and innovators from outside the industry who inspire different thinking. 

2020 members include:

Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved. 

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As I have recently remarked, the TCPA is the biggest cash cow in the history of American class action practice.

Apropos: Friday a court entered an order approving an attorney fee request of $89,116,333.33 in favor of a group of TCPA plaintiff lawyers that successfully pursued a certified TCPA class action to trial against a collector.

Now that’s a payday. Think it’ll encourage more TCPA suits?

The case–Perez v. Rash Curtis & Assocs., Case No. 4:16-cv-03396-YGR, 2020 U.S. Dist. LEXIS 68161, (N.D. Cal. April 17, 2020)–resulted in a $267MM verdict against the collector related to dialer calls to cell phones obtained via skip tracing. We covered the case last year.

Notably, the Court refused to apply the Golan line of cases–authorizing the reduction of TCPA awards in certified class actions on constitutional grounds–and held that there was no objective way to reduce the award.  The Court does note, however, that at some point the judgment becomes uncollectable and “[TCPA] cases such as these plead for settlement.”

This case calls out for further in-depth analysis. More to come TCPAWorld.

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Want to be the first to learn about and track trends on industry-impacting issues like this? The iA Case Law Tracker can help you do that in less time than it takes to pour your morning cup of coffee.

Editor’s Note: For all related insideARM articles and other information, please check insideARM’s COVID-19 Impact resources page.

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Below is a quick roundup of updated state guidance regarding COVID-19 regulations and executive orders.

New York and Maryland
Requiring face masks for employees.

New York issued an executive order that requires employers who are still operating as essential businesses to provide protective face coverings for their employees who are present in the workplace amid the emergency. The coverings are to be provided at the employer’s expense. New York’s executive order is here. 

Maryland issued a similar executive order, except the Maryland order seems to be limited in scope to retail establishments. The order’s definition of “retail establishment” seems to be limited to businesses that are physically customer-facing.

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Oregon
Prohibiting the garnishment of stimulus checks.

The new trend in town is regulators blocking CARES Act stimulus checks from involuntary collections, such as garnishments and attachments. Massachusetts’ Attorney General issued such guidance last week, and it seems that the domino effect is beginning. Oregon has now issued an executive order forbidding the garnishment of stimulus check money.

The executive order states that during the pendency of the COVID-19 emergency period, financial institutions that receive deposits of stimulus money must treat such money “in the same manner as federal benefit payments” unless the garnishment states that it is an award of restitution for a civil judgment based on a criminal offense. 

The order goes into effect immediately, and Oregon’s Attorney General and Department of Justice are to provide further guidance regarding these directives.

New Jersey
Tightening restrictions on open essential businesses.

New Jersey’s governor issued a new executive order on April 10 that places tighter restrictions on businesses that remain open as essential businesses. While many of the restrictions apply to retail and construction businesses, there is a section (section 5) that discusses the obligations of owners of buildings used for essential businesses, such as office parks and residential buildings. The requirements include frequent cleaning and disinfecting high-touch areas on top of maintaining normal cleaning procedures, and ensuring that the facility has sufficient workers to perform cleaning protocol.

Washington State
Prohibiting evictions and foreclosures.

On April 16, Washingon’s governor extended the state’s prohibitions against evictions and other measures—it now goes through June 4, 2020. The extension also issues strict prohibitions for landlords, property owners, and property managers, including the prohibition of treating unpaid rent as an enforceable debt that is collectible where the non-payment was a result of COVID-19. Other prohibitions include issuing notices to vacate, seeking evictions, and assessing late fees or other charges for non-payments or late payments.

ANN ARBOR, Mich. — HealPay, a leading payment solutions provider, announced today a 90-day trial offer to firms currently experiencing difficulties during the outbreak of COVID-19. The offer includes access to HealPay’s standard Portal and IVR payment software. Both solutions are agentless/self-service, require no additional hardware, and are compliant with the FDCPA and other industry regulations.

“Countless businesses are suddenly required to work remotely for an unknown period of time,” says Co-Founder and CEO, Erick Bzovi. “Our technology allows collections firms and billers to communicate with and provide payment access to clients and consumers quickly, easily, and remotely.”

HealPay’s online and phone payment software provides 24/7 convenient access with the ability to make a payment by credit card, debit card, or ACH. Organizations in accounts receivables, consumer finance, healthcare, and charitable and religious organizations industries are able to offer customers a convenient payment experience while being compliant with the latest industry regulations.

Businesses can visit HealPay.com/Trial to learn more about the trial offer and get started.

About HealPay  

HealPay provides innovative, consumer-centric payment solutions to businesses nationwide. Attorneys, collections, receivables, charitable organizations, property managers, finance companies, and other types of billers rely on our solutions to accept multiple payment types online and over the phone with or without a human agent. 

Editor’s Note: This article previously appeared on the Ontario Systems Blog and is republished here with permission.

The insideARM COVID-19 Impact resources page contains all of the latest news as well as official state notices and other information to help your company navigate these uncertain waters. 

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State responses to the COVID-19 pandemic are changing fast. For all of us, it’s a very uncertain time. Now that unemployment claims have topped 6.65 million, governments are trying to lessen the financial pain for consumers already struggling to pay their debts. In many cases, the impact on third-party collection agencies has been severe.

What should you be doing to keep calm, carry on, and manage risk in these unprecedented times?

Earlier this week, I sat down with two of my Ontario Systems colleagues—Compliance Consultant Director Sara Woggerman and Senior Director of Product Engineering and Product Management Dan Womack— for our first weekly COVID-19 crisis management webinar, “Understanding ‘Inconvenient Time’ and State Restrictions During This Most Inconvenient Time.” We discussed what ARM businesses need to consider and do to successfully navigate the new legal landscape in the age of COVID-19. (You can access the full webinar recording here.)

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State Stay-at-Home Orders: How to Operate Responsibly

State stay-at-home orders have caused enormous disruption for many ARM agencies. Our goal is to help you weather the storm by keeping you informed so you can adapt to changing circumstances in compliance with state and federal mandates.

Before we discuss how you might approach collections in the COVID-19 era, let’s talk about the operational adjustments you’ll need to make in the days and weeks ahead.

Determine whether you’re an essential business

Review the definition of financial services or financial affiliates under your state’s definition. Some states are changing their definitions after issuing a stay-at-home order or within the order itself. In the case of commercial debt, you’ll want to review the definitions of the debt and debt collector under state laws.

Identify any remote work requirements or barriers

Certain states prohibit remote collections entirely. Others allow it but impose additional requirements. Some states have temporarily waived branch licensing requirements. If you’re looking for real-time updates, Cornerstone Support’s Coronavirus guidance (for both employment matters and collection activity) is an outstanding resource.

Pro tips

• Catalog your remote workers’ locations. Some states require this information.
• Call your insurance company to find out if they need the information as well.
• Be ready to defend against future negligence claims by having collectors attest, in writing, to the fact that they are working in a private, closed-off area of their home; are adhering to your policies and procedures; and are following your workstation expectation with regard to clean desk, password protections, etc.

Guidelines and Restrictions Governing Collection Activity

State guidelines and mandates related to suspension of debt vary widely, and they’re changing often. For the duration of the COVID-19 crisis, someone in your organization should be dedicated to staying on top of these changes. In addition to Cornerstone Support, insideARM, ACA International, and the Receivables Management Association International (RMAI) are great sources of COVID-19 guidance.

Consumer attorneys read the civil liability section of the Fair Debt Collection Practices Act (FDCPA) frequently, if not daily. Right now, most ARM leaders aren’t thinking long term about exposures they might be creating. But there are some things you need to do today to close gaps and prevent exposure later.

Credit reporting

You’ll need to determine how state-ordered suspension of collection activity or deferment of payments may affect consumers whose data you’re reporting. Then you’ll need to decide whether you’ll furnish any new data or accounts.

Earlier this week, the CFPB issued guidance on the Fair Credit Reporting Act (FCRA). As a result of the pandemic, the CFPB will consider the consumer reporting agency or furnisher’s individual circumstances when dispute responses are delayed beyond the 30-day guideline. As long as you’re making a good-faith effort to investigate disputes as quickly as possible, the CFPB will not cite an examination or bring an enforcement action.

Pro tip

See the Consumer Data Industry Association (CIDA) FAQ document 58 for codes collectors should use for accounts affected by a natural or declared disaster.

Payment processing

You’ll need to establish a policy that outlines how deferred payments will be handled. The legal risks posed by preauthorized EFTs, payment plans, checks on record, etc., will differ from payments the consumer-initiated themselves via portal, phone, or IVR.

In states that have prohibited collection activity, your safest bet is to suspend any payment plans involving charging credit cards or debiting accounts until you have contacted the consumer. Understand, some agencies have taken the position that unless the state order or law specifically prohibits the collector from processing previously authorized payment arrangements, they are willing to assume the risk of noncompliance.

Interacting with consumers

The FDCPA’s inconvenient time provision is alive and well. As always, you’re prohibited from contacting consumers at a time or place affected by a natural disaster or declared state of emergency.

Many consumers have been deeply affected by COVID-19, whether they’re sick, caring for someone, in the hospital, or unemployed. I recommend asking consumers outright whether and how the crisis is affecting them so you can successfully defend an inadvertent violation of the inconvenient time provision.

It’s important not to let the use of a dialer or any sort of prerecorded message block your ability to detect consumers who are particularly hard hit by this crisis.

Pro tips

• Stop workflows for any communications you and your legal counsel deem high risk.
• Provide agents with scripts that account for consumers’ stress and unease. Empathy is crucial during this time.
• If you are the middleman between consumers and a creditor and law firm, stay in close contact with the law firm so you’ll know how they’re responding to the crisis (e.g., suspending garnishment).

Bottom Line: Consult Your Attorney, and Proceed with Care

Language in some states’ collection restrictions leaves room for interpretation. Instead of mandating a suspension of activity, they “urge” or “encourage” certain steps. Discuss these guidelines with your attorney, and consider his or her input and your risk tolerance before making any decisions.

It’s also important to document everything you’re doing in response to this crisis including technology changes, script changes, and relocation of personnel. Keep these details well organized in a central location. Any change you make is a deviation from standard policy, so you must be prepared to show that you had reasonable procedures in place to comply with COVID-19 state mandates and existing federal law.

Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved. 

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It’s always interesting to see the way the web of federal statutes fit together (or don’t) when regulating certain conduct.

Take debt collection calls for instance. It has long been held that a consumer that provides their phone number directly to a caller consents to receive automated informational calls from that caller in connection with the purpose for which the number was provided. That’s just common sense.

Further, it has been held that providing a phone number to a creditor operates as consent for calls by third-parties such as debt collectors. So far so good.

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And it has even been held that providing a number at time of admission to a hospital operates as consent for service providers working at that hospital—such as doctors—to call to collect debts from that hospital stay, including through third-party debt collection companies. Ok.

But just because consent for TCPA purposes can be so conveyed does not mean that consent for purposes of other statutes is equally durable or presumed.

In Russo v. POM Recoveries, Inc., 18-cv-5472 (JMA) (AKT), 2020 U.S. Dist. LEXIS 61949 (E.D.N.Y. April 8, 2020), for instance, a defendant is stuck in a suit for placing a telephone call directly to a number supplied by a consumer as part of a hospital visit under the Fair Debt Collection Practices Act, and not under the TCPA. Under the FDCPA it is unlawful to communicate with any third party regarding a consumer’s debt unless the consumer has provided their consent to such contact directly to the debt collector.

In Russo, however, the consent to call the number at issue—which turned out not to be the plaintiff’s number—was provided at time of admission to the hospital and not directly to the collection company. So whereas the collector had Plaintiff’s consent to call the number under the TCPA the call was yet not valid because consent to contact the number had been supplied through an intermediary and not directly as the law requires.

Notice all the little wrinkles here. In the first place, the caller presumably did not know it was contacting a third-party at all; it was merely trying to contact the consumer at the number provided. Yet the leaving of a voicemail at the subject phone number resulted in a communication with a non-debtor in violation of the FDCPA because the number turned out not to be the consumer’s number after all.

This means that a collector is at a double risk from wrong number calling using pre-recorded voice messages or ATDS: i) direct liability to the called party for making calls without consent under the TCPA; and ii) liability to the debtor for communicating without the specific consent required by the FDCPA. This is true although the FCC’s reassigned number database is still some months away.

Watch out!

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Want to see how the FDCPA, TCPA, and FCRA play together? The iA Case Law Tracker can help you do that in less time than it takes to pour your morning cup of coffee.

Remember the Department of Education’s NextGen project? Well, it’s been canceled. At least, part of it has.

I know.

Let’s go back to the beginning for a minute and cover a few of the big contributors to how we got here.

Dr. A. Wayne Johnson

In June 2017 Education Secretary Betsy DeVos announced her intent to appoint Wayne Johnson as Chief Operating Officer for Federal Student Aid. Previously, he held positions at VISA USA, Providian Financial, and First Data Corporation, and was CEO of First Performance Corporation and Reunion Student Loan Finance Corporation. DeVos said at the time,

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“Wayne is the right person to modernize FSA for the 21st Century. He actually wrote the book on student loan debt and will bring a unique combination of CEO-level operating skills and an in-depth understanding of the needs and issues associated with student loan borrowers and their families. He will be a tremendous asset to the Department as we move forward with a focus on how best to serve students and protect taxpayers.” 

NextGen was Wayne’s brainchild. And then, he announced in October 2019 that he would be leaving his post to seek an appointment to the U.S. Senate. The conservative Republican is running against 20 others for the special Senate election in November to fill the balance of the term of retired Sen. Johnny Isakson. 

On March 25, 2020, candidate Johnson said he thinks the student loan benefit package in response to COVID-19 should be extended from 6 months to 12 months. He added, “The national response to the coronavirus was never the time to talk about canceling student debt. Debt forgiveness is just one part of a real, bipartisan plan. We need to do more than just cancel student loan debt on a piecemeal basis; we need to cancel the Federal student loan program and chart a new course to pay for secondary education in Georgia and around the country.”

The years-long litigation saga between large private collectors (PCAs) and the Department of Education (ED)

It all started in 2014 when the five-year 2009 ED contract for debt collectors ended. New small business contracts were awarded on schedule, but the large-firm contracts were delayed, awarded, protested, underwent a “do-over,” and then A LOT of litigation. To get out of it, in May 2018 ED ultimately canceled the whole solicitation. ED’s justification? Large PCAs would no longer be needed because the whole process is going to be reimagined as part of the NextGen system and process that was announced in 2017.

The PCAs ultimately lost their battle against ED in August 2019.

The litigation that moved to NextGen

The NextGen plan would put all federal student loan servicers on a common technology platform with a single database. The PCAs’ filed a complaint, saying ED had improperly bundled pre-and post-default servicing in the same procurement, which is a) illegal and b) makes it impossible for debt collectors to compete for work unless they can either a) provide all services required by the full student loan cycle (which, it’s argued, no company is capable of) or b) establish a viable teaming arrangement as a subcontractor (which, it’s argued, is both challenging and would cause a conflict of interest). This article provides a great background on the twists and turns.

Meanwhile, NextGen is a REALLY BIG PROJECT on a very tight timeline. Really big government projects often don’t go as planned, even under the best of circumstances. This one, remember, lost its champion last October. Also, along the way, the details of the solicitation have changed multiple times and deadlines were postponed.

The latest official action in the solicitation was recorded November 12, 2019. Then, things went quiet (although sources tell insideARM there was a lot going on behind the scenes).

Suddenly, on April 2, 2020, Nelnet announced that ED had notified the company that its proposal in response to the Enhanced Processing Solution (EPS) component of NextGen has been deemed “outside of the competitive range and will receive no further consideration for an award.” EPS is the technology system and certain processing functions the Department plans to use to 43 million student loan customers. The company said it requested a debriefing by ED and that they intend to file a protest challenging the decision.

Nelnet has been the only announcement so far, however, we have to assume others may have received a similar notice.

And finally, on April 3, 2020, ED canceled the solicitation. Here’s what it says on the procurement site:

“Cancellation of Solicitation Number 91003119R0007, Optimal Processing Solution (OPS). The solicitation is canceled in accordance with FAR 5.207 (f) effective with this notice. On December 19, 2019, the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE Act) (H.R. 5363) became law. While FSA is still assessing the requirements and implications of the FUTURE Act, it is clear the legislation will have a significant impact on FSA’s business processes and the scope of the OPS requirements necessitating FSA’s cancellation of this solicitation.”

insideARM Perspective

There are other portions of NextGen. This cancelation applies to solicitation R0007. Who knows what will happen with the other pieces. A lot of money has been spent responding and then re-responding and then re-responding to these solicitations.

Yet again, we’re left wondering how a major decision by the Department of Education will affect both borrowers and student loan collectors. At least for now, it seems the small PCAs that were awarded contracts in 2014 will continue to have work…well, that is, if they are still around after the COVID-19-related prohibition on outbound collection efforts expires.

Here’s a quick little case law hit for you. Consumer attorneys are grasping at straws, and the courts are having none of it. Take, for example, a case out of the Middle District of Florida.

In Lorenzo v. Durham v. Durham, LLP, No. 2:20-cv-109 (M.D. Fla. Apr. 6, 2020), a consumer—represented by one of those “frequent filer” attorneys based in New York—filed an FDCPA lawsuit alleging that a collection letter is misleading. Why? Because in the validation notice, it stated that unless the consumer disputes the validity of the debt in 30 days, “the debt will be assumed to be valid by the creditor and by this Firm.” (Emphasis added.)

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According to the consumer, the FDCPA only allows the debt collector to assume the validity of an undisputed debt. Stating that the creditor may do so as well allegedly goes too far.

The court put a hard stop to this case by granting the defendant debt collection law firm’s motion to dismiss—essentially cutting the case off before it gets to the costly litigation stage of discovery.

According to the court, the letter would not mislead the least sophisticated consumer. Specifically, the court calls out an old Eleventh Circuit from 2014—Caceres v. McCalla Raymer, LLC— which already addressed and disposed of this type of claim. In Caceres, the allegation was identical: the consumer claimed that a collection letter that stated the creditor will assume an undisputed debt is valid.

The Eleventh Circuit sided with the debt collector, stating that the “debt collector is obviously the agent of the creditor…the least sophisticated consumer would think that if the debt collector was entitled to assume the debt is valid, the creditor would have the right to do the same.”

Following the Eleventh Circuit’s logic, the court here dismissed the claim.

insideARM Perspective

Are we surprised to see the resurgence of a claim that has already been decided by a binding appellate court decision? No. It’s happened many times before, most recently in the Second Circuit on the whole interest disclosure issue. The Second Circuit had to issue several decisions on the issue siding with debt collectors and even that didn’t stop the claims being filed by the many “frequent filers” within that jurisdiction.

It’s time that debt collectors strike back. Rule 11 of the Federal Rules of Civil Procedure calls for sanctions against an attorney if they file a claim that is not warranted under existing law or if they file a claim for an improper purpose, such as “to harass, cause unnecessary delay, or needlessly increase the cost of litigation.” Motions for sanctions should be filed liberally.

With this particular case, for example, directly on-point, binding circuit precedent already said that this claim doesn’t hold water and there is no FDCPA violation. A simple legal research query that even a law student could do would have disclosed that. Despite this, the claim was filed anyways—likely in an effort strong-arm settlements out of debt collectors who simply cannot afford to defend each and every claim that comes through their door since they won’t recover their legal fees even if they win on the merits. If that doesn’t violate Rule 11, I don’t know what does.

Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved.

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One year ago, Plaintiff Navient – a student loan and collection company – flipped a switch and sued copious plaintiff-lawyers in Navient v. Law Offices of Jeffrey Lohman.  Navient alleged a devious plot, hatched to bilk Navient out of millions. Navient claimed that these plaintiff-lawyers hunted student borrowers with debt to Navient, convinced them to stop paying Navient, and to instead pay them to renegotiate their debts.  The mucho unkosher part is how the plaintiff-lawyers stirred up consumer claims.  As alleged in the original complaint:

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“…[They] would often provide their clients with a “script” for “revoking” consent to receive telephone calls from [Navient], and would surreptitiously stay on the telephone lines while calls with [Navient] were taking place… [They] often recorded such conversations, without the knowledge or consent of [Navient]… [They] frequently instructed their clients not to answer any further calls from [Navient], the intent and effect being to ensure the number of potentially actionable calls was inflated…”

“Alternatively, [they] would issue letters to [Navient] on behalf of their purported clients requesting to redirect communications to them. In their letters, [Defendants] advised the debt was ‘disputed’ …to manufacture TCPA claims by laying an arguable predicate for such claims with a deliberately vague and muddled ‘revocation’ of TCPA consent.”

After the lawyers manufactured these TCPA claims the students would be referred to Defendant Law Offices of Jeffrey Lohman who’d crank up the claims into lawsuits for max settlement extraction.

Navient went all out; it’s a messy docket, everflowing with a dozen+ named defendant attorneys and law firms.  Not satisfied, in December 2019, Navient added ten defendants to the brawl, including Defendant GST for being part of the scheme. 

Defendant GST is a super niche company that purchases accounts receivables, from plaintiff-lawyers that assist student debtors.  After GST was hauled into the amended complaint, Defendant GST turned around and counter sued Navient back. In a wild filing twist, GST alleged that Navient’s in house counsel directed Navient’s employees to call student debtors, and convince them to fire their lawyers: causing students to terminate or not pay their lawyers, which “destroyed and/or substantially reduced the value of the accounts receivable that GST had acquired…”

Navient filed a motion to dismiss GST’s claims.  The court agreed with Navient, and dismissed all GST’s counterclaims.  Let’s see how this now cut and dry conspiracy suit transpires. 

Editor’s Note: For all related insideARM articles and other information, please check insideARM’s COVID-19 Impact resources page.

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Washington, D.C. becomes the latest jurisdiction to ban outbound collection efforts during the pending coronavirus pandemic. The COVID-19 Response Supplemental Emergency and Temporary Amendment Act of 2020 passed unanimously yesterday, and D.C.’s Attorney General made clear that he would begin enforcing it immediately.

The new law goes into effect immediately and lasts until 60 days after the emergency ends. The law prohibits the outbound collection via any medium—phone calls, letters, electronic messages—to consumers from debt collectors and debt buyers. The law, however, allows for a debt collector to return consumer-initiated communications. The prohibition on outbound collection efforts explicitly does not apply to original creditors who are collecting on their own behalf. 

In addition, the law prohibits both creditors and debt collectors from initiating legal proceedings, repossessions, or visiting a consumer’s home regarding debts that are secured by a vehicle. 

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insideARM Perspective

We previously wrote about the dangers of blanket collection bans—they allow consumers who are not financially impacted by COVID-19 to be unfairly enriched on the backs of others who will likely join the unemployed ranks. It’s the right thing to do to provide hardship allowances to consumers who are impacted by the emergency, but as we’ve said before—the credit ecosystem is a two-way street. 

Interestingly, DC’s new ban on outbound collections does not apply to creditors. There are two points to this. First, what policy purpose—other than easy PR points for unjustly bashing debt collectors—does it serve to ban outbound collection efforts by third-party collectors while explicitly allowing it for creditors? If third-party collectors are banned from collecting, then creditors will have no choice but to ramp up their in-house collections to make up for it. DC’s law seems arbitrary, and there are better ways of solving the problem, such as requiring collectors to provide hardship assistance to consumers if requested. Second, the new law leaves an open question: where do first-party collectors fall?

Most importantly, outbound communication bans from debt collectors prevent consumers from receiving important information about their accounts, which harms consumers in the long run.