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September 30, 2017

ABA supports legislation exempting lawyers’ litigation activities under FDCPA and CFPB Oversight

The ABA is supporting legislation that would restore traditional state court regulation and oversight of creditor lawyers who file legal actions to collect debts owed to their clients.

H.R. 1849, known as the “Practice of Law Technical Clarification Act of 2017,” would exempt creditor lawyers engaged in litigation activities from the Fair Debt Collection Practices Act (FDCPA) and from Consumer Financial Protection Bureau (CFPB) regulatory jurisdiction under the Dodd-Frank Act.

In particular, the bill would amend the FDCPA to exclude licensed attorneys and law firms engaged in litigation activities from the definition of “debt collector” and would also expand the existing “practice of law exemption” in Section 1027(e) of the Dodd-Frank Act to include the litigation activities of creditor lawyers.

The FDCPA, when first enacted in 1977, contained a broad exemption for “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client” because attorneys are already subject to standards of professional conduct and are regulated by the highest court of the state in which they are licensed. Even though Congress voted in 1986 to eliminate the lawyer exemption to allow regulation of creditor lawyers’ non-litigation activities, the courts have subsequently ruled that the FDCPA also applies to creditor lawyers even if they are engaged in litigation. In addition, the Dodd-Frank Act, enacted in 2010, granted the CFPB broad authority to regulate both lawyer and non-lawyer debt collectors and to enforce the FDCPA.

The House Financial Services Subcommittee on Financial Institutions and Consumer Credit examined H.R. 1849 along with several other financial reform bills during a Sept. 7 hearing.

An ABA position paper entered into the hearing record by subcommittee Chairman Blaine Luetkemeyer (R-Mo.) explains that the association supports H.R. 1849 because:

● state courts, not the CFPB or other agencies, are in the best position to regulate lawyers and the legal profession;

● the legislation is consistent with Congress’s original intent not to regulate creditor lawyers engaged in the practice of law, including those lawyers’ litigation activities;

● the bill is narrowly tailored and would only exempt creditor lawyers’ litigation activities, and it would not create a broad exemption for those lawyers’ other debt collection actions; and

● the Federal Trade Commission (FTC) has repeatedly recommended that the FDCPA be clarified to exempt creditor lawyers engaged in litigation and that Congress should reexamine and amend the definition of “debt collector” to exclude such lawyers from the statute;

During the Sept. 7 hearing, Anne P. Fortney, a partner emerita with the Hudson Cook law firm who is a former associate director of the FTC’s Bureau of Consumer Protection, agreed with the ABA position.

She testified that “H.R. 1849 would relieve collection attorneys who are engaged in litigation of unnecessarily burdensome compliance obligations and supervisory interference that inhibit their ability to zealously advocate for their clients.” Fortney also concluded that the bill is a “narrowly-tailored, practical solution” that would “retain regulation and oversight of debt collection attorneys engaged in non-litigation activities.” 


Back to the September 2017 Washington Letter