A bill pending in the state House that would lift restrictions that the legislature enacted in 2009 to protect consumers from abusive debt collection has found broad backing among business groups.
What distinguishes HB 541 among the bevy of bills before the House is the range of support for the bill. It would benefit companies that purchase bad consumer debt but is supported by some A-list business groups that aren’t part of the debt-buying industry. However, the members of the latter group are sellers of the debt.
The bill’s backers include the N.C. Chamber, the N.C. Bankers Association, the N.C. Retail Merchants Association and the state chapter of the National Federation of Independent Business, which represents small businesses.
Supporters of the bill say that the 2009 law, approved with bipartisan support, swung the pendulum too far in the direction of shielding consumers, making it tough to collect the debt people owe.
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But the bill – and the list of groups backing it – is generating dismay among consumer advocates.
“It just adds other members to the anti-consumer team, which is already a pretty deep bench,” said Ellen Harnick, senior policy counsel for the Durham-based Center for Responsible Lending. “It is just disappointing ... to think that there is this notion that we are going to change the laws of our state so that creditors can get a few more cents on the dollar than they’d otherwise get.”
Lobbyists have made sure that legislators are aware of the business community’s desire to see the bill become law.
When he addressed a House committee meeting this week, Bill Scoggin, a lobbyist with the Troutman Sanders law firm, made a point of mentioning each of the organizations backing the legislation.
Scoggin represents Encore Capital Group, one of the nation’s largest debt buyers. Debt buyers acquire delinquent consumer debt, such as credit card debt, for pennies on the dollar from companies that have given up trying to collect what they are owed. The debt buyers then try to collect the debt themselves.
The House bill is one of several pieces of legislation proposed this session that have been opposed by consumer groups. A Senate bill that would have increased costs for borrowers who take out small consumer finance loans is officially dead after failing to win approval of the full Senate prior to Thursday’s “crossover” deadline.
Although the debt buyers bill wasn’t approved by the full House prior to the deadline, it remains alive thanks to a procedural maneuver.
A similar bill introduced in the Senate, SB 511, failed to survive the crossover deadline.
Opponents argue the House bill would lead to a resumption of the abusive practices that hurt consumers and prompted state legislators to pass a remedial law. Supporters say North Carolina’s regulations are unreasonable and the most restrictive in the nation.
“It’s just a way to get some of the bureaucracies out of the way,” said Gary Salamido, a lobbyist for the N.C. Chamber.
“H.B. 541 provides an opportunity for companies that originally issued credit, such as retailers, that was not paid off to recover some of these losses,” Andy Ellen, president and general counsel of the state merchants association, said in an email.
The bill would eliminate the requirement that debt buyers must include detailed information about the debt – including when and where the debt originated and specifics about the amount of interest and fees agreed upon – before suing a consumer in court.
“The 2009 law has made North Carolina the most unfriendly state in the nation for collections – ultimately hurting consumers’ access to affordable credit,” Sheryl Wright, senior vice president of corporate and government affairs at Encore Capital, said in a statement.
Don Redmond, vice president of government relations at debt-buying firm PRA Group, said the bill takes a “more balanced” approach because it also includes some pro-consumer measures, such as requiring that debt buyers notify consumers if the statute of limitations has run out on their debt and that they therefore can’t be sued.
But bill opponents haven’t been swayed. They argue that if the bill becomes law, it would mean a return to the days when debt buyers indiscriminately filed lawsuits against consumers, including those who had actually paid their bills. Moreover, the details included in the lawsuits were so minimal that consumers couldn’t even determine whether they had paid, or successfully disputed, the bill in question.
Kevin Anderson, who is in charge of the consumer protection division in the state Attorney General’s Office, told legislators those lawsuits “seemed to be predicated on the notion that consumers just won’t show up and contest the suits.”
Those problems persist today, he added, in states that didn’t take action to protect consumers.
Harnick pointed out that New York state’s court system, in announcing new consumer-protection rules last fall, reported that in 98 percent of the consumer debt lawsuits brought in that state by debt buyers, the consumers weren’t represented by a lawyer.
“Creditors have frequently secured default judgments for the wrong amount of money or even against the wrong party, or for debt that has already been paid or for which the statute of limitations has already expired,” the court noted in a news release announcing the changes. “While the vast majority of these lawsuits involve a few thousand dollars, the consequences – ruined credit ratings and garnishment of wages and bank accounts – can be devastating for many consumers.”
Nathan Batts, senior vice president and general counsel of the state bankers association, said that in light of the concerns that have been raised about HB 541, he anticipates that if the bill advances further, “we would likely see a version that has undergone some additional refinements based on the discussion among the various stakeholders.”