“Monkey see, Monkey do.” Coming soon to a town near you?
In a knee jerk, but well intended, response to the COVID-19 crisis and California’s extended shelter in place order, the Los Angeles City Council unanimously passed a proposal that all debt collection should be halted during the coronavirus crisis. If enacted, other cities will likely follow suit and create the start of an additional layer of collections prohibitions nationwide, complicating an already confusing business landscape.
The proposal, introduced by Councilwoman Monica Rodriguez, does not take any immediate action to halt collections activity, nor does it specify any prohibition on collections activities initiated from outside of Los Angeles, but it does call on LA Mayor Eric Garcetti to impose a moratorium on debt collection activity in the city.
In their request to have the mayor to declare collection agencies to be nonessential businesses during the emergency order spurred by the pandemic, they in essence, would render all collectors, by function, in the city of los Angeles, be it agency, bank or credit union, as non-essential workers. A reversal in roles that, if these personnel were not reassigned to other duties, could add them to the rolls of the recently unemployed as layoffs and furloughs could occur. The devil is in the details and all about the wording and enforcement.
While repossession activity is not mentioned in the proposal, Councilwoman Monica Rodriguez made a statement with a direct inference. “Families are already struggling and experiencing economic trauma — we don’t need the repo man showing up on doorsteps and taking away assets,”.
The proposal was, of course, applauded by special interest groups long opposed to collections activities, such as the Western Center on Law and Poverty and the California Low-Income Consumer Coalition, who both assert that the state of California has not gone far enough to cease debt collection during the COVID-19 crisis.
“There is no activity more counterproductive right now than pushing people who are already on the financial precipice over the edge,” declared Ted Mermin, director of the California Low-Income Consumer Coalition. “This is, by and large, not the mom-and-pop grocery store down the street. These are very large companies that hold most of the debt that’s being pursued.”
Mayor Garcetti stated on Wednesday, that he had asked the city attorney to make an assessment as to whether imposing such a moratorium is permissible under L.A.’s legal jurisdiction. If so, the mayor said, he would be “happy to not only embrace that, but to lead the nation.”
Where much of the focus from the collections and repossession industry has been on the proposed legislation to curb or prohibit repossession and collections activity from Washington DC, as proposed in the Sherrod Bill (S 3565) and the Waters Bill (HR 6379), these bills have been languishing while congress remains in hiding and will likely only be inserts into larger stimulus packages when their sponsors find the leverage, otherwise, these bills would never pass the senate or President’s desk on their own.
DC’s inactivity has emboldened impatient states like Massachusetts, Maryland, Pennsylvania, Illinois and others to taking action on their own. Therefore, it should come with little surprise, that the largest city in the nation, Los Angeles, whose population of 3.9M rivals almost half of the states in the nation, would begin to act like it’s own city state. While not the first to propose or act on this, it can come with reasonable assurance that other cities will follow suit, which could create dire precedence and consequence for all aspects of the collections, repossession and lending worlds for many months to come.
As if performing collections and repossession during what may turn out to be largest economic downturn in American history wasn’t hard enough, these localized moratoriums are quickly developing into a labyrinth of city and state regulations on top of the already complex world of collections and repossessions, where federal laws like the UCC and the Bankruptcy codes often contradict one another and are rarely legislated with knowledgeable specific clarity and end up requiring courtroom decisions for guidance.
Facebook Comments