WASHINGTON–The House has passed a bill on debt collection that is opposed by CUNA but supported by consumer groups, more than 80 of which had called for its passage.
The bill, H.R. 2547, the Comprehensive Debt Collection Improvement Act, was criticized as a “slipperly slope” by CUNA ahead of the vote, while its supporters, including House Financial Services Committee Chairwoman Maxine Waters (D-CA), argued it brings much-needed “clarity and reforms to stop abusive debt collection practices.”
The bill passed by a vote of 215 to 207.
NAFCU also stated on its website following passage of the bill, "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."
In expressing its opposition, CUNA specifically pointed to Section 403 of the bill, which would amend the Fair Credit Reporting Act (FCRA) to prohibit credit scoring models from treating certain medical debt information on consumers’ credit report as a negative factor.
“Lenders rely on complete and accurate credit reports when underwriting loans. Restrictions on the reporting or consideration of certain debt prevents lenders from seeing borrowers’ complete debt circumstances and clouds lenders’ ability to fairly assess borrowers’ creditworthiness,” CUNA wrote. “An incomplete view of borrowers’ credit history reduces lender confidence in credit reports and scores, impacting pricing decisions and credit availability. The borrowers most impacted by the consequences of this provision will be low- and moderate-income borrowers whose financial well-being could benefit the most from access to affordable credit from a credit union.”
Concern Over Precedent
In addition, CUNA said it was concerned over the precedent that the provision might set.
“Today, it’s medical debt; tomorrow, it could be student debt; in a decade, will Congress prohibit the reporting of home mortgage debt?” said the letter signed by CUNA CEO Jim Nussle. “This could represent the first step on a slippery slope that could fundamentally damage credit underwriting, making it harder for lenders to make safe and sound credit decisions.”
CUNA told Congress borrowers and lenders alike benefit from a credit reporting system that produces an accurate and complete record of a borrower’s credit situation.
“This provision undermines consumers’ financial well-being and jeopardizes the ability of lenders to make safe and sound underwriting decisions,” CUNA stated.
Consumer Groups Hail Passage
But consumer groups took a different view of the bill.
“Debt collection has been a top source of consumer complaints year in and year out, and last year, the Consumer Financial Protection Bureau received 82,700 consumer complaints (up 10% from 2019) about inappropriate or illegal collection attempts,” said National Consumer Law Center attorney April Kuehnhoff in a statement. “Data from the Urban Institute also show racial disparities in debt collection, with 39% of residents in communities of color with debt in collection compared to 24% of residents in white communities. I urge the Senate to consider the bill soon as possible, as reform is urgently needed, especially for families struggling with massive debt due to the pandemic.”
The Specifics
The NCLC noted it was one of 88 public interest, legal services, consumer, labor, and civil rights
organizations that had sent a letter of support for the bill to U.S. representatives, urging passage to protect vulnerable consumers from abusive debt collection practices.
The reforms the groups said they support include:
* Prohibiting the use of confessions of judgment as an unfair credit practice that eliminate notice and the right to be heard
* Prohibiting certain abusive collection practices directed at servicemembers, including threats to reduce rank or revoke security clearance
* Requiring discharge of private student loans due to total and permanent disability
* Prohibiting collection of medical debt for the first two years and credit reporting of debt arising from any medically necessary procedures
* Requiring debt collectors to obtain consent before using electronic communications and provide written validation notices
* Amending the FDCPA to expand and clarify coverage, including extending coverage for all federal, state, and local debts collected by debt collectors
* Adjusting statutory damages in the FDCPA for inflation and indexing them to index for inflation in the future
* Clarifying FDCPA coverage for non-judicial foreclosures.