[Enigma]

FDCPA Gets New Industry-Approved Amendments

October 2, 2006
by Patrick Lunsford,
CollectionIndustry.com

Changes in the FDCPA have been approved by the U.S. Congress and sent to the President to sign into law. The amendments were part of the Financial Services Regulatory Relief bill which was passed this weekend.

Some of the key changes include clarification around “mini-Miranda” disclosures and legal codification that allows agencies to collect during the 30-day validation period.

The mini-Miranda clarification comes in updating protocol for legal pleadings and other communications, such as 1099-C forms. One of the new amendments states, “A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication.” Also, communications that do not seek the payment of a debt, like 1099-C forms or Gramm-Leach-Bliley Act privacy notices, will no longer be considered an initial communication and will not require mini-Mirandas.

The FDCPA was also specifically amended to allow for the collection of a debt during the 30-day violation period, unless the consumer has an active written dispute regarding the debt.

The FDCPA amendments were part of a larger Financial Services Regulatory Relief bill which the House passed last week and the Senate approved Saturday. The bill aims at correcting many outdated or redundant regulations in the financial services and banking industries.

The new amendments also include a provision that certain bad check enforcement firms, such as companies that run pretrial diversion programs for bad check offenders, will not be legally defined as debt collectors for purposes of the FDCPA.

ACA International, the association for credit and collection professionals, has made FDCPA clarification one of its main targets over the past 18 months.

Source:

[roybean]

That's alright; we just have to stay on top of things. Even though we know there are people who will exploit these changes.

[jlynn]

Originally Posted by Enigma

The FDCPA was also specifically amended to allow for the collection of a debt during the 30-day violation period, unless the consumer has an active written dispute regarding the debt.

Nearly fell out of my chair on that one. Enigma is this a copy and paste? Did Patrick really say violation?????

Besides, how could it be amended when it was that way in the first place?????

The new amendments also include a provision that certain bad check enforcement firms, such as companies that run pretrial diversion programs for bad check offenders, will not be legally defined as debt collectors for purposes of the FDCPA.

I would like to read this part - am I to assume that "certain bad check enforcement firms are really the "District Attorney's Office", which has always been excluded as a gov't agency?

[roybean]

JLynn I didn't even see that part or either I read it too fast. How can we verify this information?

[roybean]

http://www.acainternational.org/medi...d=7592&via=325

[jlynn]

Why yes, Patrick really did say that. Wonder if Sheriff Mike will let me keep the post up? http://www.collectionindustry.com/fo...13&STARTPAGE=1

[jlynn]

I had to PDF that article just for posterity.

[roybean]

I think debt collectors are on the rampage:
http://www.narca.org/meetings/2006fallconf/program.htm

And I also found this:
Stop Congress from Helping Debt Collectors
http://ga4.org/consumerlaw/alert-des...ert_id=3744020

[Enigma]

http://www.aba.com/aba/documents/win...ary_050206.pdf

Section-by-section Analysis of the Financial Services Regulatory Relief Act of 2006.

[Enigma]

Section 719
This section amends the Fair Credit Reporting Act to define an FDIC request for FICO scores as part of its preparation for a resolution as a permissible purpose, enabling the FDIC to obtain FICO scores by contacting credit reporting agencies and to obtain current consumer credit reports. This section amends the Fair Credit Reporting Act to define a NCUA request for FICO scores as part of its preparation for a resolution as a permissible purpose, enabling the NCUA to obtain FICO scores by contacting credit reporting agencies and to obtain current consumer credit
reports.

[jlynn]

I read over the link...

Originally Posted by Enigma

Some of the key changes include clarification around “mini-Miranda” disclosures and legal codification that allows agencies to collect during the 30-day validation period.

The mini-Miranda clarification comes in updating protocol for legal pleadings and other communications, such as 1099-C forms. One of the new amendments states, “A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication.” Also, communications that do not seek the payment of a debt, like 1099-C forms or Gramm-Leach-Bliley Act privacy notices, will no longer be considered an initial communication and will not require mini-Mirandas.

Didn't see this, but I do remember reading something about it.

The FDCPA was also specifically amended to allow for the collection of a debt during the 30-day violation period, unless the consumer has an active written dispute regarding the debt.

Or this

The new amendments also include a provision that certain bad check enforcement firms, such as companies that run pretrial diversion programs for bad check offenders, will not be legally defined as debt collectors for purposes of the FDCPA.

Great spin Patrick! Evidently some states allow private agencies to do this, and guess what, they were getting sued! Those "certain" firms still have to be under some tight controls for the FDCPA to NOT apply.

[jlynn]

Originally Posted by Enigma

Section 719
This section amends the Fair Credit Reporting Act to define an FDIC request for FICO scores as part of its preparation for a resolution as a permissible purpose, enabling the FDIC to obtain FICO scores by contacting credit reporting agencies and to obtain current consumer credit reports. This section amends the Fair Credit Reporting Act to define a NCUA request for FICO scores as part of its preparation for a resolution as a permissible purpose, enabling the NCUA to obtain FICO scores by contacting credit reporting agencies and to obtain current consumer credit
reports.

I didn't understand what they were talking about.

[Enigma]

http://thomas.loc.gov/cgi-bin/query/...fxEgd:e109286:



TITLE VIII--FAIR DEBT COLLECTION PRACTICES ACT AMENDMENTS

SEC. 801. EXCEPTION FOR CERTAIN BAD CHECK ENFORCEMENT PROGRAMS.

(a) In General- The Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.) is amended--

(1) by redesignating section 818 as section 819; and

(2) by inserting after section 817 the following:

`Sec. 818. Exception for certain bad check enforcement programs operated by private entities

`(a) In General-

`(1) TREATMENT OF CERTAIN PRIVATE ENTITIES- Subject to paragraph (2), a private entity shall be excluded from the definition of a debt collector, pursuant to the exception provided in section 803(6), with respect to the operation by the entity of a program described in paragraph (2)(A) under a contract described in paragraph (2)(B).

`(2) CONDITIONS OF APPLICABILITY- Paragraph (1) shall apply if--

`(A) a State or district attorney establishes, within the jurisdiction of such State or district attorney and with respect to alleged bad check violations that do not involve a check described in subsection (b), a pretrial diversion program for alleged bad check offenders who agree to participate voluntarily in such program to avoid criminal prosecution;

`(B) a private entity, that is subject to an administrative support services contract with a State or district attorney and operates under the direction, supervision, and control of such State or district attorney, operates the pretrial diversion program described in subparagraph (A); and

`(C) in the course of performing duties delegated to it by a State or district attorney under the contract, the private entity referred to in subparagraph (B)--

`(i) complies with the penal laws of the State;

`(ii) conforms with the terms of the contract and directives of the State or district attorney;

`(iii) does not exercise independent prosecutorial discretion;

`(iv) contacts any alleged offender referred to in subparagraph (A) for purposes of participating in a program referred to in such paragraph--

`(I) only as a result of any determination by the State or district attorney that probable cause of a bad check violation under State penal law exists, and that contact with the alleged offender for purposes of participation in the program is appropriate; and

`(II) the alleged offender has failed to pay the bad check after demand for payment, pursuant to State law, is made for payment of the check amount;

`(v) includes as part of an initial written communication with an alleged offender a clear and conspicuous statement that--

`(I) the alleged offender may dispute the validity of any alleged bad check violation;

`(II) where the alleged offender knows, or has reasonable cause to believe, that the alleged bad check violation is the result of theft or forgery of the check, identity theft, or other fraud that is not the result of the conduct of the alleged offender, the alleged offender may file a crime report with the appropriate law enforcement agency; and

`(III) if the alleged offender notifies the private entity or the district attorney in writing, not later than 30 days after being contacted for the first time pursuant to clause (iv), that there is a dispute pursuant to this subsection, before further restitution efforts are pursued, the district attorney or an employee of the district attorney authorized to make such a determination makes a determination that there is probable cause to believe that a crime has been committed; and

`(vi) charges only fees in connection with services under the contract that have been authorized by the contract with the State or district attorney.

`(b) Certain Checks Excluded- A check is described in this subsection if the check involves, or is subsequently found to involve--

`(1) a postdated check presented in connection with a payday loan, or other similar transaction, where the payee of the check knew that the issuer had insufficient funds at the time the check was made, drawn, or delivered;

`(2) a stop payment order where the issuer acted in good faith and with reasonable cause in stopping payment on the check;

`(3) a check dishonored because of an adjustment to the issuer's account by the financial institution holding such account without providing notice to the person at the time the check was made, drawn, or delivered;

`(4) a check for partial payment of a debt where the payee had previously accepted partial payment for such debt;

`(5) a check issued by a person who was not competent, or was not of legal age, to enter into a legal contractual obligation at the time the check was made, drawn, or delivered; or

`(6) a check issued to pay an obligation arising from a transaction that was illegal in the jurisdiction of the State or district attorney at the time the check was made, drawn, or delivered.

`(c) Definitions- For purposes of this section, the following definitions shall apply:

`(1) STATE OR DISTRICT ATTORNEY- The term `State or district attorney' means the chief elected or appointed prosecuting attorney in a district, county (as defined in section 2 of title 1, United States Code), municipality, or comparable jurisdiction, including State attorneys general who act as chief elected or appointed prosecuting attorneys in a district, county (as so defined), municipality or comparable jurisdiction, who may be referred to by a variety of titles such as district attorneys, prosecuting attorneys, commonwealth's attorneys, solicitors, county attorneys, and state's attorneys, and who are responsible for the prosecution of State crimes and violations of jurisdiction-specific local ordinances.

`(2) CHECK- The term `check' has the same meaning as in section 3(6) of the Check Clearing for the 21st Century Act.

`(3) BAD CHECK VIOLATION- The term `bad check violation' means a violation of the applicable State criminal law relating to the writing of dishonored checks.'.

(b) Clerical Amendment- The table of sections for the Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.) is amended--

(1) by redesignating the item relating to section 818 as section 819; and

(2) by inserting after the item relating to section 817 the following new item:

`818. Exception for certain bad check enforcement programs operated by private entities.'.

[Enigma]

http://thomas.loc.gov/cgi-bin/query/...mp/~c109kLuO4S


SEC. 802. OTHER AMENDMENTS.

(a) Legal Pleadings- Section 809 of the Fair Debt Collection Practices Act (15 U.S.C. 1692g) is amended by adding at the end the following new subsection:

`(d) Legal Pleadings- A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).'.

(b) Notice Provisions- Section 809 of the Fair Debt Collection Practices Act (15 U.S.C. 1692g) is amended by adding after subsection (d) (as added by subsection (a) of this section) the following new subsection:

`(e) Notice Provisions- The sending or delivery of any form or notice which does not relate to the collection of a debt and is expressly required by the Internal Revenue Code of 1986, title V of Gramm-Leach-Bliley Act, or any provision of Federal or State law relating to notice of data security breach or privacy, or any regulation prescribed under any such provision of law, shall not be treated as an initial communication in connection with debt collection for purposes of this section.'.

(c) Establishment of Right to Collect Within the First 30 Days- Section 809(b) of the Fair Debt Collection Practices Act (15 U.S.C. 1692g(b)) is amended by adding at the end the following new sentences: `Collection activities and communications that do not otherwise violate this title may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor.'.

[Enigma]

Originally Posted by jlynn

I didn't understand what they were talking about.

http://thomas.loc.gov/cgi-bin/query/...mp/~c109kLuO4S

SEC. 719. ACQUISITION OF FICO SCORES.

Section 604(a) of the Fair Credit Reporting Act (15 U.S.C. 1681b(a)) is amended by adding at the end the following:

`(6) To the Federal Deposit Insurance Corporation or the National Credit Union Administration as part of its preparation for its appointment or as part of its exercise of powers, as conservator, receiver, or liquidating agent for an insured depository institution or insured credit union under the Federal Deposit Insurance Act or the Federal Credit Union Act, or other applicable Federal or State law, or in connection with the resolution or liquidation of a failed or failing insured depository institution or insured credit union, as applicable.'.

Probably has to do with a receiver of a failing bank or CU to go back and obtain consumer FICO's to ensure that loans were properly made and not given out to friends of the banker.

Such as giving a $1 million loan to someone wth a FICO of 420.

The way the FCRA reads now, if it is a closed end loan you cannot repull FICO without a PP.

[jlynn]

Originally Posted by Enigma

(2) CONDITIONS OF APPLICABILITY- Paragraph (1) shall apply if--

`(A) a State or district attorney establishes, within the jurisdiction of such State or district attorney and with respect to alleged bad check violations that do not involve a check described in subsection (b), a pretrial diversion program for alleged bad check offenders who agree to participate voluntarily in such program to avoid criminal prosecution;

This is the huge part. A person that has written a hot check must agree to participate in the program. I assume before the check gets into the hands of a private entity? Therefore, the consumer should know who they are dealing with and the penalties for failing (criminal prosecution) to complete the program. That's what will set this apart from a CA that is collecting on behalf of the original OC without ever letting a check go thru criminal processes. It will be interesting to see how the big players (like Telecheck) start twisting this.

`(C) in the course of performing duties delegated to it by a State or district attorney under the contract, the private entity referred to in subparagraph (B)--

`(iii) does not exercise independent prosecutorial discretion;

Is there a legal definition of prosecutorial discretion? Seems like a very broad statement.

All in all, it sounds like a fair amendment to me. How many times have we seen collectors attempting to collect fees that might be awarded (but aren't statutory set amounts) if a check were to make it into the criminal system?