Should Congress overhaul the debt collection system?

This bill has Passed the House of Representatives
Bill Summary

The Comprehensive Debt Collection Improvement Act is an omnibus bill (a proposed law that covers a number of topics) encompassing eight reforms for the debt collection system: (1) Prohibits “confession of judgment” agreements on loans to small business owners. A “confession of judgment” allows the lender to penalize the borrower for not paying without going through the court system. (2) Prohibits debt collectors from threatening a servicemember with prosecution under the Uniform Code of Military Justice. (3) Cancels student loans if the student dies or is permanently disabled. (4) Requires creditors to notify the consumer before reporting medical debt to a government agency (typically for credit ratings). (5) Prohibits debt collectors from contacting a consumer via text or email without the consumers’ consent. (6) Limits federal government use of contracted debt collectors until 90 days after the debt is owed and limits those debt collectors' fees. (7) Increases penalties for debt collectors who fail to comply with the act. (8) Ends “non-judicial foreclosures” where homes can be foreclosed without the inhabitants having an opportunity to contest foreclosure in court. Sponsor: Rep. Maxine Waters (Democrat, California, District 43) View full bill text ➔

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Opponents say

• "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. An incomplete view of borrowers’ credit history reduces lender confidence in credit reports and scores, impacting pricing decisions and credit availability." Source: Credit Union National Association

• "[Title Three] is unnecessary and would impose unhelpful bureaucracy into a situation where banks are already doing what the legislation would mandate. Currently, banks are discharging private student loans when the borrower becomes totally and permanently disabled. Adding a federal mandate with various extra steps and requirements will only hinder a well-functioning process and not provide any help to private student loan borrowers." Source: Richard Hunt (President and CEO of the Consumer Bankers Association)

Proponents say

• "My mother took pride in paying her bills on time, but after several life-disrupting events, there came a point where she no longer could afford it. No matter how hard she worked, we owed everybody – the utility company, the landlord, the bank, the car company – and we were frequently harassed by debt collectors. Our story is the story of millions of families, who go through life with feelings of fear, vulnerability, judgment, and shame thanks to abusive debt collectors. My bill, the Ending Debt Collection Harassment Act, works to actively curb the aggressive tactics and psychological harassment that debt collectors are all too quick to employ." Source: Rep. Ayanna Pressley (Democrat, Massachusetts, District 7)

• "Consumer credit can determine a person’s ability to own a home, is used to set auto insurance rates, and is even used to determine employment eligibility, so it is absolutely vital that we ensure consumers, especially residents in communities like the ones I represent who have historically had limited to no access to credit, are able to have as many tools as possible to secure it. For too long, a sudden health crisis or emergency room visit has meant years of being denied housing, transportation, or other necessities because of a medical item on a credit report—this bill will change that." Source: Rep.Rashida Tlaib (Democrat, Michigan, District 13)

• "Our servicemen and servicewomen make extraordinary sacrifices on our behalf. The last thing they need is harassment from manipulative debt collectors who take advantage of their service. This legislation will put a stop to those practices." Source: Rep. Madeleine Dean (Democrat, Pennsylvania, District 4)