OAG Testimony on Protecting Consumers from Unjust Debt Collection Practices Amendment Act of 2021

Statement of Wendy J. Weinberg

Senior Assistant Attorney General

Office of the Attorney General for the District of Columbia

Before the Committee of the Whole, Phil Mendelson, Chairman

Public Hearing

Bill 24-357, Protecting Consumers from Unjust Debt Collection Practices Amendment Act of 2021

November 29, 2021


Good afternoon Chairman Mendelson, Councilmembers, staff and residents of the District. My name is Wendy Weinberg, and I am a Senior Assistant Attorney General in the District of Columbia’s Office of the Attorney General (OAG). I am here to express Attorney General Karl Racine’s strong support for Bill 24-357.  

Debt Collection in the District

A surprisingly high percentage of District residents are dealing with debt in collections. Forty-five perfect of District residents of color are facing calls and other debt collection activities. District-wide, 33% of residents contend with these activities.  Meanwhile, consumers are facing increasing debts. More than a quarter of District residents reported using credit cards or loans to meet their spending needs during the pandemic, and the median amount of debt in collections in the District is nearly a thousand dollars—$955.

District residents report a variety of problems and harassing conduct in their contacts with debt collectors; I’ll now touch on the three most frequently reported problems. The most frequent complaint is collectors calling after consumers have asserted their federal rights to stop debt collectors from communicating with them. The second is repeated harassing calls from collectors. For example, the Consumer Financial Protection Bureau has reported that credit card companies authorize their collectors to make three to 15 calls per account per day. In other words, if a consumer has two accounts, she could receive as many as 30 collection calls per day. The third most frequent complaint, reported by fully 24% of complainants, involves debt collectors making false representations about debt.

My office has taken action against debt collectors that have failed to follow current law.  For example, in 2017 OAG reached a settlement with a debt collection company named Cashcall that made misleading statements to consumers.  We returned nearly $2 million to District consumers and secured forgiveness of more than $1 million in debt.  And in 2018, OAG joined 42 states in a settlement with Encore Capital Group, Inc., a debt buyer that was collecting on debts using unverified and potentially inaccurate information. That settlement returned over $500,000 in debt relief to District residents.

But despite these victories, updates to the District’s debt collection law are sorely needed to protect consumers from a variety of unfair debt practices.

Current District Law

The current permanent statute governing debt collection in the District was enacted in 1971, and much of its language remains frozen in time, (it still refers to telegram fees), even though debt collection practices have evolved significantly over the last fifty years. It is outdated and provides inferior protections than many other state laws. For instance:

  1. Most significantly, current law is limited to debt incurred through “consumer credit sales, consumer leases, and direct installment loans.” It therefore does not apply to credit card or medical debt. This is particularly concerning given that credit card and medical debt are two major forms of debt exacerbated by the COVID-19 pandemic.
  2. Unlike the federal Fair Debt Collection Practices Act, it does not limit a debt collector’s ability to communicate a consumer’s indebtedness to an employer, instead only narrowly prohibiting the communication of false information to an employer. Allowing a debt collector to call an employer can have serious adverse consequences, and it is hard to imagine why most of these communications would be necessary, except to unfairly pressure an employee.
  3. It does not explicitly cover third-party debt buyer activity. Debt buyers are third-party businesses that buy debts from other creditors and attempt to collect on it. Although they purchase debt for pennies on the dollar, debt buyers seek to recover the full balance from consumers and often take consumers to court to do so. Over half of collection cases filed in the District are filed by third-party debt buyers, and we have seen evidence of such debt buyers attempting to collect on debt that is barred by the statute of limitations or relying on incomplete and inaccurate debt information to file suits against consumers.

OAG Supports the Reforms in Bill 24-357

This bill would solve those problems by expanding our debt law protections to cover medical and credit card debt, by prohibiting harassment including communicating with employers about a consumer’s debt, and by explicitly covering the activity of third-party debt buyers. It would also clarify that a person cannot be jailed for failing to pay a debt.

Recognizing the pandemic’s unique economic impact, the Council protected consumers against almost all debt collection activities under its COVID-19 public health emergency legislation. Those protections have now lapsed. As a result, we can expect a quick pick up in collection activities as debt collectors process their backlog of cases. This makes it more important than ever to permanently update our laws against unfair or deceptive collection activities.

Many residents are still clawing their way out of the pandemic recession, and as they work to pay down their debts, it is essential that they not face unfair collection practices. We can protect our residents from further harm by enacting the basic reforms in this bill. Thank you.