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The House is expected to vote this week on legislation that seeks to combat abusive debt collection practices. Yesterday, ahead of a Rules Committee hearing to set debate on the legislation, NAFCU joined with several other financial services industry trades to raise concerns about language in the bill that would expand the definition of a "debt collector" and increase risks to lenders.

In the letter sent Tuesday, NAFCU and the other trades reiterated the need for appropriate, legal execution of debt collection "to ensure the continued and sustainable flow of credit while also providing legal and financial protections to the borrowers."

However, the groups argued that the legislation would overturn a Supreme Court ruling related to the issue. The court ruled that "entities enforcing a security interest without also seeking repayment or deficiency judgment generally do not qualify as debt collectors under the [FDCPA]." The decision also clarified that businesses engaged in non-judicial foreclosure proceedings are not debt collectors under the FDCPA.

The trades noted that a majority of states have structured their legal systems to allow for non-judicial foreclosures, "which maintain significant state and federal procedural protections for borrowers while streamlining the foreclosure process." This reduces potential costs and delays associated with litigation, while balancing the needs of borrowers and benefits to communities.

Should this legislation be enacted, the trades argued that it "would disrupt the choices states have made in structuring their foreclosure regimes, imposing unnecessary costs and delay to the enforcement of real property interests and subsequently increasing the cost of credit."

NAFCU will continue to advocate against proposals that would hamper legitimate debt collection efforts and increase costs for all parties involved.