Recently, Financial Services Chairwoman Maxine Waters introduced the Comprehensive Debt Collection Improvement Act, a comprehensive package of provisions designed to weaken businesses’ debt collecting capabilities. This is another example of the growing, misguided belief that if we just ignore debt, it will simply go away without consequence. As bankers know, preventing debt collection will only undermine our credit markets, hurt small businesses, and ultimately make credit more expensive and less accessible for the Americans who need it most.
Specifically, there are several concerning provisions included in the Comprehensive Debt Collection Improvement Act. The bill would make it increasingly difficult to contact borrowers by prohibiting them from being contacted via email. This would directly undermine a CFPB regulation from last year that gave consumers the option to be contacted in a less intrusive manner of communication while still maintaining their right to opt-out. Essentially, the goal of the provision is to make it easier for debtors who do not answer their phones to say they have not been contacted and continue to ignore debt.
Another troubling provision in the bill is the prohibition of important predictive information, like past-due medical debt, from being included in credit reports. While this is painted as a fairness issue, and on the surface may sound nice, it prevents credit reporting agencies from issuing accurate reports. It makes it impossible for lenders to make informed decisions regarding loans.
Every Member of Congress can agree that consumers who owe a debt should be treated with respect and dignity. They should not be subjected to abusive or harassing behavior, and they should be able to work out payment options. This premise has already been codified in the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. However, to essentially prevent debt collection and compromise credit reporting will be disastrous for our economy. You and I both know, lenders in Missouri and across the country rely on accurate credit reports to appropriately provide credit to consumers. If this information is incomplete or doesn’t provide an accurate picture of creditworthiness, lenders are forced to raise rates to ensure they can absorb potential losses.
Further, receiving payment for services rendered is a fundamental premise of our economy. Limiting the ability to collect debts will only harm businesses that have provided these services — again, causing them to stop doing business with people with less-than-excellent credit. Risk management is vital to keeping our financial system healthy and strong, and the smooth functioning of credit reporting and ensuring payment for services rendered actually strengthens the credit market. It keeps costs low for all Americans, particularly those who need it most.
I would like to provide a more positive report from the Financial Services Committee. I’m sure you (just like me) have more than enough access to bad news without me adding to it. Unfortunately, this is what House Democrats consider financial policy. This is the reality we have to live with. Ultimately, I do not believe this bill will become law due to the Senate’s ability to block it. But its important for bankers to keep in mind what we’re dealing with and be vocal when current or potential policies threaten our economy. This country turned to the banks to see us through the pandemic, but don’t expect a thank you. Now that we’re on the other side, the economic shutdown will continue to be used as an excuse to forgive debts, discourage employment and encourage government dependency, and make your job more difficult. As always, it’s important that we continue to communicate and head off policies that will cripple the economic recovery.
