When the pandemic began early last year, the government extended aid to families and businesses everywhere. Funding was provided, payments were deferred, and many people were temporarily spared from facing eviction.
Now that the workforce is beginning to restabilize, creditors and other institutions that are owed a balance from individuals are pushing harder for repayment. In many places rent moratoriums have expired, allowing landlords the right to evict for nonpayment. Many people are being forced to prioritize payments to bring down either their consumer debt or medical debt, and it is not uncommon for them to prioritize their mortgage or rent payments over a credit card bill.
With this in mind, Congress has focused on debt-collection practices in a number of pieces of legislation. To help Americans experiencing financial difficulties, these efforts have included proposed laws on debt collection, repayment extensions, reextensions, and debt forgiveness.
A staggering $85 billion was added to the debt balances of Americans during the first quarter of 2021.
House Resolution 2547, also known as the Comprehensive Debt Collection Act, was proposed by Rep. Maxine Waters (D-Calif.) in April 2021. The bill aims to protect consumers and their dependents from harassment and abuse by debt collectors.
Additionally, those with private student loan debt would receive expanded protection. For example, if the debtor of a private student loan dies, the loan dies with the borrower. The dependents of the debtor are not liable for unpaid balances. However, some have raised concerns that this form of protection may result in increased borrowing costs.
The bill passed on May 13 with a 215-207 vote.
More Efforts on Student Loan Debt
For those with federal student loan debt, efforts have been made to help those who did not borrow from a private lender. After first being delayed by the previous administration until September 2020, and again until October 2021, federal student loan payments have been deferred once more until Jan. 31, 2022.
President Joe Biden has also canceled the federal student loan debt owed by thousands of people with disabilities and struggling with repayment. And the interest rate has been temporarily reduced to zero percent during the student loan payment suspension. Federal officials anticipate that those who can afford to make some form of payment during this time can likely decrease the principal more easily in the interim.
More efforts from Congress can likely be expected to help Americans with student loan debt. And for the time being, those with federal student loans should not have to worry about receiving messages from debt collectors.
State and Local Debt-Collection Changes
Debt-collection laws and regulations vary from state to state. The District of Columbia, for example, sought to update its debt-collection laws to include modern forms of communication and regulate credit card and medical debt collections.
That law would prohibit abusive practices to collect any medical debt or credit card debt, prohibit harassment by limiting creditors to contacting debtors no more than three times in a seven-day period, including calls, emails, or text messages. Further protections include:
- Reaching consumers only within certain daytime hours;
- Not contacting consumers anonymously;
- Refraining from passing account information to employers or relatives of the debtors;
- Using any profanity, offensive language, or threats when speaking with debtors.
More so, the legislation would prohibit criminal penalties for nonpayment, overturning existing D.C. rules that give creditors the right to take debtors to court and possibly face a bench warrant for failing to appear.
Whether state government or federal government, legal professionals across the country need to learn and understand these emerging laws on debt collection. The more you know, the better you will be able to assist those seeking your advice.