[House Report 116-656]
[From the U.S. Government Publishing Office]
116th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 116-656
======================================================================
SMALL BUSINESS FAIR DEBT COLLECTION PROTECTION ACT
_______
December 16, 2020.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Ms. Waters, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 5013]
The Committee on Financial Services, to whom was referred
the bill (H.R. 5013) to apply the Fair Debt Collection
Practices Act to small businesses to the same extent as such
Act applies to consumers, to require the Director of the Bureau
of Consumer Financial Protection to define ``small business''
for purposes of such Act, and for other purposes, having
considered the same, report favorably thereon with amendments
and recommend that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 3
Section-by-Section Analysis...................................... 3
Hearings......................................................... 4
Committee Consideration.......................................... 4
Committee Votes.................................................. 4
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 6
Statement of Performance Goals and Objectives.................... 6
New Budget Authority and CBO Cost Estimate....................... 6
Committee Cost Estimate.......................................... 6
Unfunded Mandate Statement....................................... 6
Advisory Committee............................................... 6
Application of Law to the Legislative Branch..................... 6
Earmark Statement................................................ 7
Duplication of Federal Programs.................................. 7
Changes to Existing Law.......................................... 7
The amendments are follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Fair Debt Collection
Protection Act''.
SEC. 2. FAIR DEBT COLLECTION PRACTICES FOR LOANS TO SMALL BUSINESSES.
(a) In General.--The Fair Debt Collection Practices Act (15 U.S.C.
1692 et seq.) is amended--
(1) in section 803--
(A) by amending paragraph (5) to read as follows:
``(5) The term `debt' means any obligation or alleged
obligation to pay money arising out of a transaction, whether
or not such obligation has been reduced to judgment.''; and
(B) by adding at the end the following new paragraph:
``(9) The term `commercial credit bureau' means any person
which, for monetary fees, dues, or on a cooperative nonprofit
basis, regularly engages in whole or in part in the practice of
assembling or evaluating commercial credit information or other
information on businesses for the purpose of furnishing credit
reports to third parties, and which uses any means or facility
of interstate commerce for the purpose of preparing or
furnishing credit reports.'';
(2) by redesignating section 819 as section 820; and
(3) by inserting after section 818 the following:
``Sec. 819. Application to small business debt
``(a) In General.--This Act shall apply to small business debt to the
same extent as this Act applies to debt of consumers.
``(b) Small Business Debt Defined.--The term `small business debt'--
``(1) means any non-equity obligation or alleged obligation
of a partnership, corporation, trust, estate, cooperative,
association, government or governmental subdivision or agency,
or other entity that is less than $5,000,000; and
``(2) does not include any obligation or alleged obligation--
``(A) of an individual; or
``(B) that is primarily for personal, family, or
household purposes.''.
(b) Clerical Amendment.--The table of contents for the Fair Debt
Collection Practices Act is amended by striking the item relating to
section 819 and inserting the following:
``819. Application to small business debt.
``820. Effective date.''.
(c) Conforming Amendments.--The Fair Debt Collection Practices Act
(15 U.S.C. 1692 et seq.) is amended--
(1) in section 805(b), by inserting ``or a commercial credit
bureau (as applicable)'' after ``consumer reporting agency'';
(2) in section 806(3)--
(A) by striking ``consumers who'' and inserting
``consumers or small businesses that''; and
(B) by inserting `` or to a commercial credit bureau
(as applicable),'' after ``consumer reporting agency'';
and
(3) in section 807(16), by inserting ``or a commercial credit
bureau'' after ``this Act''.
Amend the title so as to read:
A bill to apply the Fair Debt Collection Practices Act to
small business debt to the same extent as such Act applies to
consumers, and for other purposes.
Purpose and Summary
On November 8, 2019, Congressman Al Lawson introduced H.R.
5013, the ``Small Business Fair Debt Collection Protection
Act,'' which expands the Fair Debt Collection Practices Act's
(FDCPA) protections to cover small business loans, as
determined by CFPB in consultation with the Small Business
Administration.
Background and Need for Legislation
In 1977, Congress enacted the FDCPA in order to help curb
abusive debt collection practices. CFPB has authority to write
regulations implementing the FDCPA. The agency also enforces
the law, along with the Federal Trade Commission (FTC). The
FDCPA defines a debt collector as a third-party entity whose
primary business is in collection or pursing debts owed to a
creditor. However, entities pursing business debts (including
small business debts) are not covered by FDCPA.
Small business loan borrowers do not enjoy the same
protections individual consumers have under federal law. Some
stakeholders have argued that small business borrowers should
be treated fairly and respectfully throughout a collections
process and have similar protections afforded to consumers
under the FDCPA. Recently, the New York Times investigated how
this practice has harmed taxi drivers with overvalued taxi
medallion loans that have left thousands of drivers bankrupt.
Some consumers looking to earn a living as taxi medallion
operators were offered and signed contracts amounting up to $1
million dollars. These lenders loosened standards and
encouraged borrowers to refinance and take out more money when
medallion prices rose. As was discussed in testimony by
Bhairavi Desai, Executive Director of the New York Taxi Workers
Alliance, some lenders included confession of judgement
provisions in the contracts. As taxi revenue fell, some lenders
refinanced terms while others exercised confessions of
judgments to garnish wages, seize medallions or other assets,
and employed private debt collectors who reportedly harassed
affected borrowers after they had defaulted.
This legislation would amend FDCPA to expand the definition
of debt to include debt incurred from small business loans. It
would restrict the means and methods by which collectors can
contact small business debtors, as well as the time of day and
number of times contact can be made. Furthermore, it would
limit actions of third-party debt collectors who are attempting
to collect debts from small businesses on behalf of another
person or entity.
Section-by-Section Analysis
Section 1. Short Title.
This section provides that H.R. 5013 may be cited as the
``Small Business Fair Debt Collection Protection Act''.
Section 2. Consumer Protections Related to Debt Collection Practices
Amends Section 803 of The Fair Debt Collection Practices
Act (15 U.S.C. 1692 et seq.) to define debt as ``any obligation
or alleged obligation to pay money arising out of a
transaction, whether or not such obligation has been reduced to
judgment.''
Amends Section 803 of The Fair Debt Collection Practices
Act (15 U.S.C. 1692 et seq.) by adding a new section entitled
``Application to Small Businesses''. This applies the Act to
small businesses in the same manner as the Act applies to
consumers. This section requires the Director of the Bureau to
issue a rule to define the term `small business' for purposes
of this section.
Makes a clerical amendment by striking the effective date
section and replacing it with an amendment to Section 806(3) of
the Fair Debt Collection Practices Act (15 U.S.C. 1692d). This
amendment protects small businesses from harassment or abuse by
prohibiting small businesses from being published on a list of
consumers who allegedly refuse to pay debts.
Hearings
For the purposes of section 103(i) of H. Res. 6 for the
116th Congress, on September 26, 2019, the Committee on
Financial Services held a hearing entitled, ``Examining
Legislation to Protect Consumers and Small Business Owners from
Abusive Debt Collection Practices'' to discuss three bills and
seven discussion drafts. A discussion draft of HR 5013 the
``Small Business Lending Fairness Act'', was considered.
Witnesses included the Honorable Rohit Chopra, Commissioner,
Federal Trade Commission; Rev. Dr. Cassandra Gould, Pastor,
Quinn Chapel A.M.E. Church and Exceutive Director, Missouri
Faith Voices; Ms. Bhairavi Desai, Executive Director, New York
Taxi Workers Alliance; Ms. April Kuehnhoff, Staff Attorney,
National Consumer Law Center; Professor Dalie Jimenez,
Professor of Law, University of California, Irvine School of
Law; Ms. Sarah Auchterlonie, Shareholder, Brownstein Hyatt
Farber Schreck; and Mr. John H. Bedard, Jr., Owner, Bedard Law
Group, P.C.
Committee Consideration
The Committee on Financial Services met in open session on
November 13, 2019, and ordered H.R. 5013 to be reported
favorably to the House as amended in the nature of a substitute
by a recorded vote of 31 yeas and 23 neas, a quorum being
present.
Committee Votes and Roll Call Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following roll call votes occurred during the Committee's
consideration of H.R. 5013:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of Performance Goals and Objectives
Pursuant to clause (3)(c) of rule XIII of the Rules of the
House of Representatives, the goals of H.R. 5013 are to expand
the definition of debt to include debt incurred from small
business loans; to restrict the means and methods by which
collectors can contact small business debtors, as well as the
time of day and number of times contact can be made; and to
limit actions of third-party debt collectors who are attempting
to collect debts from small businesses on behalf of another
person or entity.
New Budget Authority and CBO Cost Estimate
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a) of the
Congressional Budget Act of 1974, and pursuant to clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 402 of the Congressional Budget Act
of 1974, the Committee has requested an estimate for H.R. 5013
from the Director of the Congressional Budget Office. CBO was
unable to provide an estimate in a timely manner.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 5013. After
careful review, including discussions with CBO, and after
consulting with debt collection experts, the Committee
estimates that this legislation will have an insignificant
effect on spending.
Unfunded Mandate Statement
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act (as amended by Section 101(a)(2) of the
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee
does not believe H.R. 5013, as amended, contains any unfunded
mandates and adopts any future estimate in this regard prepared
by the Director of the Congressional Budget Office.
Advisory Committee
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Application of Law to the Legislative Branch
Pursuant to section 102(b)(3) of the Congressional
Accountability Act, Pub. L. No. 104-1 H.R. 5013, as amended,
does not apply to terms and conditions of employment or to
access to public services or accommodations within the
legislative branch.
Earmark Statement
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 5013 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as described in clauses 9(e), 9(f), and 9(g) of rule
XXI.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of H.R. 5013 establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
federal program, a program that was included in any report from
the Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Changes to Existing Law
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, H.R. 5013, as reported, are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
FAIR DEBT COLLECTION PRACTICES ACT
TITLE VIII--DEBT COLLECTION PRACTICES
Sec.
801. Short title.
* * * * * * *
[819. Effective date.]
819. Application to small business debt.
820. Effective date.
* * * * * * *
Sec. 803. Definitions
As used in this title--
(1) The term ``Bureau'' means the Bureau of Consumer
Financial Protection.
(2) The term ``communication'' means the conveying of
information regarding a debt directly or indirectly to
any person through any medium.
(3) The term ``consumer'' means any natural person
obligated or allegedly obligated to pay any debt.
(4) The term ``creditor'' means any person who offers
or extends credit creating a debt or to whom a debt is
owed, but such term does not include any person to the
extent that he receives an assignment or transfer of a
debt in default solely for the purpose of facilitating
collection of such debt for another.
[(5) The term ``debt'' means any obligation or
alleged obligation of a consumer to pay money arising
out of a transaction in which the money, property,
insurance, or services which are the subject of the
transaction are primarily for personal, family, or
household purposes, whether or not such obligation has
been reduced to judgment.]
(5) The term ``debt'' means any obligation or alleged
obligation to pay money arising out of a transaction,
whether or not such obligation has been reduced to
judgment.
(6) The term ``debt collector'' means any person who
uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is
the collection of any debts, or who regularly collects
or attempts to collect, directly or indirectly, debts
owed or due or asserted to be owed or due another.
Notwithstanding the exclusion provided by clause (F) of
the last sentence of this paragraph, the term includes
any creditor who, in the process of collecting his own
debts, uses any name other than his own which would
indicate that a third person is collecting or
attempting to collect such debts. For the purpose of
section 808(6), such term also includes any person who
uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is
the enforcement of security interests. The term does
not include--
(A) any officer or employee of a creditor
while, in the name of the creditor, collecting
debts for such creditor;
(B) any person while acting as a debt
collector for another person, both of whom are
related by common ownership or affiliated by
corporate control, if the person acting as a
debt collector does so only for persons to whom
it is so related or affilated and if the
principal business of such person is not the
collection of debts;
(C) any officer or employee of the United
States or any State to the extent that
collecting or attempting to collect any debt is
in the performance of his official duties;
(D) any person while serving or attempting to
serve legal process on any other person in
connection with the judicial enforcement of any
debt;
(E) any nonprofit organization which, at the
request of consumers, performs bona fide
consumer credit counseling and assists
consumers in the liquidation of their debts by
receiving payments from such consumers and
distributing such amounts to creditors;
(F) any person collecting or attempting to
collect any debt owed or due or asserted to be
owed or due another to the extent such activity
(i) is incidental to a bona fide fiduciary
obligation or a bona fide escrow arrangement;
(ii) concerns a debt which was originated by
such person; (iii) concerns a debt which was
not in default at the time it was obtained by
such person; or (iv) concerns a debt obtained
by such person as a secured party in a
commercial credit transaction involving the
creditor.
(7) The term ``location information'' means a
consumer's place of abode and his telephone number at
such place, or his place of employment.
(8) The term ``State'' means any State, territory, or
possession of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or any
political subdivision of any of the foregoing.
(9) The term ``commercial credit bureau'' means any
person which, for monetary fees, dues, or on a
cooperative nonprofit basis, regularly engages in whole
or in part in the practice of assembling or evaluating
commercial credit information or other information on
businesses for the purpose of furnishing credit reports
to third parties, and which uses any means or facility
of interstate commerce for the purpose of preparing or
furnishing credit reports.
* * * * * * *
Sec. 805. Communication in connection with debt collection
(a) Communication With the Consumer Generally.--Without the
prior consent of the consumer given directly to the debt
collector or the express permission of a court of competent
jurisdiction, a debt collector may not communicate with a
consumer in connection with the collection of any debt--
(1) at any unusual time or place or a time or place
known or which should be known to be inconvenient to
the consumer. In the absence of knowledge of
circumstances to the contrary, a debt collector shall
assume that the convenient time for communicating with
a consumer is after 8 o'clock antimeridian and before 9
o'clock postmeridian, local time at the consumer's
location;
(2) if the debt collector knows the consumer is
represented by an attorney with respect to such debt
and has knowledge of, or can readily ascertain, such
attorney's name and address, unless the attorney fails
to respond within a reasonable period of time to a
communication from the debt collector or unless the
attorney consents to direct communication with the
consumer; or
(3) at the consumer's place of employment if the debt
collector knows or has reason to know that the
consumer's employer prohibits the consumer from
receiving such communication.
(b) Communication With Third Parties.--Except as provided in
section 804, without the prior consent of the consumer given
directly to the debt collector, or the express permission of a
court of competent jurisdiction, or as reasonably necessary to
effectuate a post judgment judicial remedy, a debt collector
may not communicate, in connection with the collection of any
debt, with any person other than the consumer, his attorney, a
consumer reporting agency or a commercial credit bureau (as
applicable) if otherwise permitted by law, the creditor, the
attorney of the creditor, or the attorney of the debt
collector.
(c) Ceasing Communication.--If a consumer notifies a debt
collector in writing that the consumer refuses to pay a debt or
that the consumer wishes the debt collector to cease further
communication with the consumer, the debt collector shall not
communicate further with the consumer with respect to such
debt, except--
(1) to advise the consumer that the debt collector's
further efforts are being terminated:
(2) to notify the consumer that the debt collector or
creditor may invoke specified remedies which are
ordinarily invoked by such debt collector or creditor;
or
(3) where applicable, to notify the consumer that the
debt collector or creditor intends to invoke a
specified remedy.
If such notice from the consumer is made by mail, notification
shall be complete upon receipt.
(d) For the purpose of this section, the term ``consumer''
includes the consumer's spouse, parent (if the consumer is a
minor), guardian, executor, or administrator.
Sec. 806. Harassment or abuse
A debt collector may not engage in any conduct the natural
consequence of which is to harass, oppress, or abuse any person
in connection with the collection of a debt. Without limiting
the general application of the foregoing, the following conduct
is a violation of this section:
(1) The use or threat of use of violence or other
criminal means to harm the physical person, reputation,
or property of any person.
(2) The use of obscene or profane language or
language the natural consequence of which is to abuse
the hearer or reader.
(3) The publication of a list of [consumers who]
consumers or small businesses that allegedly refuse to
pay debts, except to a consumer reporting agency or to
a commercial credit bureau (as applicable), or to
persons meeting the requirements of section 603(f) or
604(3) of this Act.
(4) The advertisement for sale of any debt to coerce
payment of the debt.
(5) Causing a telephone to ring or engaging any
person in telephone conversation repeatedly or
continuously with intent to annoy, abuse, or harass any
person at the called number.
(6) Except as provided in section 804, the placement
of telephone calls without meaningful disclosure of the
caller's identity.
Sec. 807. False or misleading representations
A debt collector may not use any false, deceptive, or
misleading representation or means in connection with the
collection of any debt. Without limiting the general
application of the foregoing, the following conduct is a
violation of this section:
(1) The false representation or implication that the
debt collector is vouched for, bonded by, or affiliated
with the United States or any State, including the use
of any badge, uniform, or facsimile thereof.
(2) The false representation of--
(A) the character, amount, or legal status of
any debt; or
(B) any services rendered or compensation
which may be lawfully received by any debt
collector for the collection of a debt.
(3) The false representation or implication that any
individual is an attorney or that any communication is
from an attorney.
(4) The representation or implication that nonpayment
of any debt will result in the arrest or imprisonment
of any person or the seizure, garnishment, attachment,
or sale of any property or wages of any person unless
such action is lawful and the debt collector or
creditor intends to take such action.
(5) The threat to take any action that cannot legally
be taken or that is not intended to be taken.
(6) The false representation or implication that a
sale, referral, or other transfer of any interest in a
debt shall cause the consumer to--
(A) lose any claim or defense to payment of
the debt; or
(B) become subject to any practice prohibited
by this title.
(7) The false representation or implication that the
consumer committed any crime or other conduct in order
to disgrace the consumer.
(8) Communicating or threatening to communicate to
any person credit information which is known or which
should be known to be false, including the failure to
communicate that a disputed debt is disputed.
(9) The use or distribution of any written
communication which simulates or is falsely represented
to be a document authorized, issued, or approved by any
court, official, or agency of the United States or any
State, or which creates a false impression as to its
source, authorization, or approval.
(10) The use of any false representation or deceptive
means to collect or attempt to collect any debt or to
obtain information concerning a consumer.
(11) The failure to disclose in the initial written
communication with the consumer and, in addition, if
the initial communication with the consumer is oral, in
that initial oral communication, that the debt
collector is attempting to collect a debt and that any
information obtained will be used for that purpose, and
the failure to disclose in subsequent communications
that the communication is from a debt collector, except
that this paragraph shall not apply to a formal
pleading made in connection with a legal action.
(12) The false representation or implication that
accounts have been turned over to innocent purchasers
for value.
(13) The false representation or implication that
documents are legal process.
(14) The use of any business, company, or
organization name other than the true name of the debt
collector's business, company, or organization.
(15) The false representation or implication that
documents are not legal process forms or do not require
action by the consumer.
(16) The false representation or implication that a
debt collector operates or is employed by a consumer
reporting agency as defined by section 603(f) of this
Act or a commercial credit bureau.
* * * * * * *
Sec. 819. Application to small business debt
(a) In General.--This Act shall apply to small business debt
to the same extent as this Act applies to debt of consumers.
(b) Small Business Debt Defined.--The term ``small business
debt''--
(1) means any non-equity obligation or alleged
obligation of a partnership, corporation, trust,
estate, cooperative, association, government or
governmental subdivision or agency, or other entity
that is less than $5,000,000; and
(2) does not include any obligation or alleged
obligation--
(A) of an individual; or
(B) that is primarily for personal, family,
or household purposes.
Sec. [819.] 820. Effective date
This title takes effect upon the expiration of six months
after the date of its enactment, but section 809 shall apply
only with respect to debts for which the initial attempt to
collect occurs after such effective date.
* * * * * * *
MINORITY VIEWS
Committee Republicans support small businesses, including
ensuring they have access to the resources they need. However,
H.R. 5013, the Small Business Fair Debt Collection Protection
Act, would expand the Fair Debt Collection Practices Act
(FDCPA) to pull small businesses under the jurisdiction of the
Consumer Financial Protection Bureau (CFPB).
This bill is another attempt by the Democrats to expand the
already extensive authority of the CFPB beyond consumer
financial products and services. Congressional Republicans
believe granting broad authority to an agency that is not
authorized or equipped to supervise commercial lending would
only harm small businesses. The Small Business Administration
(SBA) and the Federal Trade Commission (FTC), among others, are
already well resourced to assist the millions of small
businesses that exist nationwide, including their needs,
grants, and programmatic support.
Consumer loans differ from commercial loans. The borrowers
are different, the pricing and underwriting are different, and
the risk is different. If enacted, H.R. 5013 could
fundamentally change the way lenders treat small business
loans, potentially limiting access to or driving up the cost of
credit.
The Financial Services committee should thoroughly review
the needs of small businesses to determine how the financial
services industry can better support them. Committee
Republicans oppose H.R. 5013 and call on the Democrat majority
to focus on legislation that will actually help small
businesses to continue to thrive, grow our economy, and create
jobs.
Alexander X. Mooney.
David Kustoff.
Lance Gooden.
William R. Timmons, IV.
Ted Budd.
J. French Hill.
John W. Rose.
Anthony Gonzalez.
Andy Barr.
Ann Wagner.
Bill Huizenga.
Steve Stivers.
Patrick T. McHenry.
Warren Davidson.
Barry Loudermilk.
Tom Emmer.
Scott R. Tipton.
Roger Williams.
Bryan Steil.
Trey Hollingsworth.
Denver Riggleman.
Lee M. Zeldin.
Frank D. Lucas.
Blaine Luetkemeyer.
Bill Posey.
[all]