The association had raised concerns about language contained in the bill that would expand the definition of a “debt collector”
May 14, 2021 – Washington DC – The House Thursday passed legislation making a series of reforms to debt collection requirements. While the National Association of Federally-Insured Credit Unions (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 the letter sent Tuesday, NAFCU and the other trades reiterated the need for appropriate, legal execution of debt collection “to ensure the continued and sustainable flow of credit while also providing legal and financial protections to the borrowers.”
However, the groups argued that the legislation would overturn a Supreme Court ruling related to the issue. The court ruled that “entities enforcing a security interest without also seeking repayment or deficiency judgment generally do not qualify as debt collectors under the [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.
NAFCU, trades raise concerns with debt collection legislation | NAFCU
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