State Debt Collection Rules

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As I continue my certification with RMAI to be a Certified Receivables Management Professional, I am truly enjoying staying abreast of the many changes we’re seeing in the receivables management industry. It isn’t just Covid-19 that is affecting decision making as many of the trends we’re seeing in the industry were in play last year as well. Read on for a summary of some of the most critical updates and changes in our industry, as well as to gain an understanding of the direction we’re headed.

The Busiest Years Yet

2019 was and 2020 is shaping up to be the busiest years regarding changes in the receivables management industry. Specifically, there have been trends as legislation affecting consumer privacy, data security and breaches, communications restrictions, licensing, statute of limitation reductions, debt expungement, interest rates, and garnishments are all being introduced in various state legislatures across the country. 

Privacy Legislation

The Gramm-Leach-Bliley Act (GLBA) has regulated the privacy of consumer data since 1999, with some states having a level of exclusion for following the GLBA, for example Arizona, California, Connecticut, Illinois, Maryland, Massachusetts, New Hampshire, New York, Virginia, Washington, and Wisconsin. However, in 2019 and 2020, California, Massachusetts, New York and Washington all had legislation before their Congress to more tightly control what happens with consumer data. States where there is no GLBA exclusion include Hawaii, Minnesota, Mississippi, New Jersey, New York, and Rhodes Island, with all these states having consumer privacy legislation in their Congresses in both 2019 and 2020; indicating that exclusion for sharing consumer data could be forthcoming. 

Part of these possible legislative changes simply center around defining what comprises consumer data, whether the data can be sold, whether the consumer can request the data be deleted, and what level of private action for enforcement is allowed. Since the California Consumer Privacy Act (CCPA) took effect on January 1, 2020, many states are watching and waiting for how it will be implemented and what the technical implementation will look like rather than working to pass their own versions of the CCPA. Banks and other financial institutions as well as our receivables management industry are all working in various ways to continue to allow access to consumer data while, of course, continuing to keep it safe. 

Data Security and Breaches

Nationwide, we’re seeing bills enacted expanding the definition of what personal information is, thus helping define what sensitive data is, what defines a breach, how data breaches are handled in the state, and who gets informed of any breach. 2019 and 2020 saw 15 states enacting or introducing bills that further define these above criteria. These states are Arkansas, California, Illinois, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Rhodes Island, Texas, Vermont, and Washington. All states have data breach legislation and any business owner should be aware of what their states’ data breach legislation is so they are always compliant, outside of what the Federal government already oversees through the Federal Trade Commission, the Bureau of Consumer Financial Protection, the Federal Communications Commission, and the U.S Securities and Exchange Commission. RMAI’s certification policy requires compliance with all state and consumer protection laws and has a data security policy that exceeds Federal standards, so luckily those in the ranks of Certified Receivables Management Professionals can rest more easily knowing they have the knowledge, resources, and training to ensure compliance.

Communication Restrictions

Continuing the trend of cases and bills around the country affecting various consumer privacy issues, 2019 and 2020 saw many bills regarding various restrictions on consumer communications. Fourteen states have enacted or have noteworthy bills in their Congress: California, Indiana, Kentucky, Massachusetts, Maryland, Maine, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Pennsylvania, South Dakota, and Texas. The bills largely focus on what defines a telemarketing call, including limiting these during a state of emergency. The definitions of robo-calls are also changing. For instance, VoIP calls have begun to be considered robo-calls depending on how those calls are set-up. Some states have banned such calls and some have defined what information can be displayed on the caller ID. The take-away for our industry is to make sure that in any state we operate in, we are aware of the current bills and changes and ensure that any contact, especially via calls, texts, and emails, follow all consumer contact restrictions and to ensure any marketing software or phone systems follow these limitations. Our goal, also, as participants in this industry is to ensure that we aren’t getting unfairly lumped into robo-calls and spam communications, as most current legislation is geared towards, for instance, scam calls or phishing attempts from India. RMAI, and other trade organizations, help advocate for our industry to ensure our business isn’t unduly penalized through these legislative changes.

Licensure

Many states are changing their licensing requirements and laws, with both California and New York increasing their requirements for various collections licensing. As an industry, while licensure does help weed out bad actors, hardline restrictions can also hurt our industry. RMAI will be keeping abreast of how these bills move through the various states, and the National Multistate Licensing System (NMLS) is also a great resource for checking updates on state licensure requirements, bills, and even sentiment. Luckily for us CRCPs, RMAI Certification standards also address licensure and help facilitate compliance with all state laws for their members. 

Statute of Limitations (SOL) and Debt Expungement

Six years is still the standard for the statute of limitations for written debt with 23 states using this timeframe, but Massachusetts, New Jersey, New York, and Ohio all have active bills to reduce this timeframe to 3 years, following the other seven states that currently have such short timeframes. RMAI is working to help protect consumers in this scenario, as once the SOL expires, the consumer is more likely to be drug into the courthouse to settle the debts rather than having the flexibility to work with someone from our industry.

Once the SOL expires, some states already have debt expungement legislation (Mississippi, North Carolina, and Wisconsin), limiting our contractual obligation to collect the debt. Our industry is seeking to remove expungement clauses in current legislation in Massachusetts, Minnesota, and New York. Five states (California, Colorado, Maine, Oregon, and Texas) had attempted legislation in 2019, but it was not passed. Similar to SOL legislation, debt expungement legislation can end up creating more headaches and issues for consumers by involving the IRS in their situations, who don’t negotiate with consumers as we do. Additionally, many states have SOL judgment reductions in the legislature, with Maine having pending legislation to decrease this term from 20 years to 1 year and Massachusetts having legislation to decrease from 20 to 5 years. The majority of states (20) still allow SOL judgments to stay on someone’s record for 10 years. This isn’t a major issue for our industry at the moment but is something we need to keep an eye on as consumer legislation continues to be introduced.  

 Garnishments and Interest Rates

Washington DC, Colorado, Illinois, Massachusetts, Maryland, Minnesota, Oregon, Vermont, Washington, and Vermont all have legislation to reduce wage garnishment allowable percentages and to use state minimum wage amounts when calculating income when these are less than the federal minimum wage.

Last but not least are decreases in interest rates post judgments. Washington, Vermont, Massachusetts, Connecticut, and Illinois all had reductions of the caps for interest rates on judgments.

In Summary

I truly appreciate having these important industry updates consolidated and discussed by professionals in our industry. I also truly value being able to summarize these updates for my readers. Knowledge is power and I am gaining so much as I keep abreast of national updates in our industry. Let me know how I can possibly help you with the knowledge I’m continually gaining!

 

Disclaimer 

This information is not legal advice and may not be used as legal advice. Information discussed or contained is not an explanation of the law and is presented for educational purposes only. 

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