ABA President Robert M. Carlson wrote to all members of the House in September urging them to pass H.R. 5082, the Practice of Law Technical Clarification Act of 2018.
Carlson said the legislation, which was approved by the House Financial Services Committee in March and is ready for floor action, would “protect the ability of small, main street businesses and their local attorneys to recover legitimate debts by curbing abusive lawsuits and burdensome regulations against those attorneys that relate to their litigation activities.” In addition, the bill would also restore traditional state court regulation and oversight of the legal profession while preserving essential consumer protections, he wrote in a Sept. 28 letter.
The bill, sponsored by Reps. Alex Mooney (R-W.Va.) and Vicente Gonzalez (D-Texas), would achieve these goals by clarifying that the Fair Debt Collection Practices Act (FDCPA) and the regulatory authority of the Consumer Financial Protection Bureau (CFPB) do not apply to creditor attorneys when they are engaged in debt collection litigation and thus are under the direct supervision of the trial judge.
Carlson explained that lawyers have been regulated for centuries primarily by the state supreme courts that license them and that the FDCPA, enacted in 1977, originally contained a complete exemption for attorneys engaged in the practice of law who collect debts on behalf of their clients.
Congress voted to eliminate the broad exemption in 1986, however, in the belief that the change would only subject attorneys to potential liability for their non-litigation activities such as improper phone calls and letters to debtors, not for their court-related activities that are already being supervised by judges. Congress later passed the Dodd-Frank Act in 2010, which granted the new CFPB broad authority to enforce the FDCPA and regulate debt collectors, but which exempted most lawyers engaged in the practice of law from the bureau’s regulatory and enforcement authority.
Despite the intention of Congress, the courts have applied the revised 1986 act to creditor lawyers even when they are engaged in litigation. As a result, many creditor lawyers are now routinely sued in federal or state court for their actions in state court proceedings that are alleged to be technical violations of the FDCPA, even when the consumer suffers no harm. In recent years, the CFPB has also aggressively sought to regulate the collection activities of creditor attorneys – including their litigation or court-related activities − despite the broad practice-of-law exemption contained in the Dodd-Frank Act.
The reforms in H.R. 5082 are appropriate, Carlson said, “as the judge presiding over the court cases – not the CFPB or debtor attorneys − is in the best position to discipline any attorney who engages in misconduct, impose appropriate sanctions based on the circumstances, and protect all the parties.”
Carlson disagreed with claims by some consumer groups that the bill would “turn back the clock” and undermine existing consumer protection, emphasizing that the bill is narrowly tailored and “consumers would still be fully protected at all times.”
“The narrow, common-sense technical reforms in H.R. 5082 are also consistent with the Federal Trade Commission’s repeated recommendations that Congress clarify the FDCPA to exclude creditor attorneys engaged in litigation,” Carlson emphasized.