On January 30 the Colorado Senate Committee on Judiciary held a scheduled hearing regarding its Sunset Review of the Colorado Fair Debt Collection Practices Act (CFDCPA, or The Act). The Act was passed in 1985, authorizing an Administrator to develop and administer licensing of collection agencies.
Since that time there have been multiple Sunset reviews, with the latest conducted last year. The October 2016 report based on that review can be downloaded here.
The report made six recommendations:
- Continue the CFDCPA for 11 years, until 2028
- Define what is expected of an individual who purchases, sells, or attempts to collect on purchased debt
- Repeal the phrase “arising out of a transaction” from CFDCPA’s definition of “debt”
- Clarify that the statute of limitations in CFDCPA enforcement action is four years
- Sunset the Collection Agency Board
- Allow consumers who have a monetary judgment against a collection agency to access surety bond funds.
Six people testified during the January 30th hearing:
- Brian Tobias, representing the Colorado Department of Regulatory Agencies
- David Reid, representing DBA International
- Rich Jones, representing the Bell Policy Center
- Julie Meade, representing the Colorado Attorney General’s Office (Ms. Meade is the current CFDCPA Administrator)
- Makyla Moody, representing the Colorado Creditor’s Bar and Tom Romola, representing the Associated Collection Agencies of Colorado, Wyoming and New Mexico
Brian Tobias, representing the Colorado Department of Regulatory Agencies
Mr. Tobias reviewed the recommendations in the report in detail, and responded to clarifying questions from the Committee.
The rest of those who testified all mentioned that they were at a disadvantage as they had not yet seen the specific language in the proposed Bill, only the report that had been released in October 2016. The marked up Bill, which they received at the hearing, can be downloaded here.
David Reid, representing DBA International
In testifying on behalf of DBA International, Mr. Reid expressed the following positions:
- DBA generally supports licensure. 33 states license debt collectors. The DBA views this as a way to keep bad actors out of the industry and allows the state to go after criminal enterprises.
- DBA supports recommendation #2 in principle, but not the way it is represented in the report. The description of the debt buying industry in the report was perhaps accurate in 2005, but not 2017. For instance, there is a lot of focus on lack of documentation. However the industry has since established a self-regulatory certification process (which has been completed by 145 companies, representing an estimated 80 percent of receivables purchased on the secondary market) that requires 15 different dat and document elements in order to purchase or sell debt. So the belief that this is happening without documentation is no longer true. Another example – page 24 of the report proposes a requirement that consumers be notified if a debt has not been validated. DBA certification standards in fact prohibit the sale of debt that is in dispute.
- Reducing the statute of limitations from 6 years to 4 will hurt consumers because it will cause more litigation to occur sooner rather than allowing time for the parties to work out a solution.
- DBA recommends against allowing the Collection Agency Board to sunset. As evidenced by some of the recommendations, it is clear that the current Administrator is not fully familiar with the industry.
Rich Jones from the Bell Policy Center
Mr. Jones simply stated that his group supports all of the recommendations and urged their implementation.
Julie Meade from the Colorado Attorney General’s office and CFDCPA Administrator
Ms. Meade expressed the following:
- The big difference between the FDCPA and the CFDCPA is licensing, and the Attorney General’s enforcement ability.
- Her office opposes an element of recommendation #6, regarding consumer access to surety bonds. She doesn’t want to be in the position of administering claims based on private rights of action. She would, however, like to see the language changed so that the Administrator would have access to the bond for any purpose, regardless of the harm. So in the future, access would be based on findings of the Administrator, and not solely limited to instances of non-remittance to clients by debt collection agencies.
Tom Romola, representing the Associated Collection Agencies of Colorado, Wyoming and New Mexico (ACA)
Mr. Romola stated that his group pretty much disagrees with the vast majority of the report, and offered the following points:
- He highlighted that there are 17 (significant) states that do not have separate debt collection law, including California, Texas, Virginia, Pennsylvania, Ohio, New York, and New Jersey, and these states seem to do fine without the redundant law.
- ACA supports recommendation #2, in part. Notwithstanding previous DBA testimony and certification program, he said “there are some problems with debt buying.” He offered his own personal experience. He supports that you should have to pass on disputes and other info like deceased information to next debt buyer. His organization does not agree with the change in statute of limitations to 4 years, saying it contradicts current law and a Supreme Court decision that say it should be six years.
Moody added that they don’t oppose idea of regulating debt buyers, but it would create internal conflicts within the act itself and would generate litigation that would be shouldered mostly by smaller businesses. She added that terms of art such as “retired debt” have not been defined in the Act. Debt buying and debt collection are two entirely different industries and ought to have separate regulatory acts.
- Recommendation #3 is pretty contentious. Changing the definition of debt as suggested in the report would create obligations that don’t belong in the Act as they are not considered debts. Also, this would make Colorado the only state in the country that would have such a definition.
Moody added the request that any amendment to change the definition would be in line with the federal act. The proposal would expand the definition of a debt significantly, expanding the scope of the FDCPA, and opening up the potential for a lot of litigation, creating a competitive disadvantage for legitimate collection agencies.
- ACA adamantly opposes recommendation #4.
- ACA opposes recommendation #5 in part. They would not like to see the Board sunset but would like to see it be restructured. Currently, the Administrator is “judge, jury & executioner.” He said they would support a true board that meets on a regular basis and has real value. Currently, the board isn’t being utilized at all. It should also incorporate creditors and consumers and deal fairly with discipline.
- ACA opposes recommendation #6. Fund is to protect clients that do not receive funds. Our bonds are a condition of our licenses. If a consumer would have an attachment against that bond, we would be in violation of our license. Also would make it more difficult for us to get bonds in the future, which would put us at a competitive disadvantage.
- ACA’s bottom line was that “because of the existence of the CFPB, FTC, FCRA, etc., the Colorado Act should be allowed to sunset. It would save the state a substantial amount of money. ½ of the 1421 complaints in Colorado aren’t valid complaints against collection agencies for doing something wrong – they are simple disputes or misunderstandings. Compared with the millions of contacts made by the industry, the percentage is nothing. Let us deal with the feds.”
Finally, Romola added an appeal that the Committee somehow address the issue of rogue credit repair firms that “hire local people to generate dispute letters by the bucketful.”
The chairman of the committee then laid the matter over for action at a later time. He stated that there was a fair amount of testimony pro and con, and a diversity of opinion on the committee. A staff representative told insideARM that the action has since been scheduled for the committee's meeting on Wednesday, February 8, at 1:30 pm MT. You can attend that meeting in person, or listen live at the General Assembly audio page here.
As we have reported previously, this is part of an active trend of individual states enhancing their own debt collection regulations, while the CFPB proceeds along its path of producing sweeping federal rules for the industry. This makes a complex situation even more complicated...and expensive for all.
In today's regulatory environment it is highly unlikely to see these types of state regulations sunsetted. Rather, as we are seeing, it is likely the regulations will be enhanced and grow.