[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]



                         


                    EXAMINING LEGISLATION TO PROTECT
                      CONSUMERS AND SMALL BUSINESS
                        OWNERS FROM ABUSIVE DEBT
                          COLLECTION PRACTICES

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           SEPTEMBER 26, 2019

                               ----------                              

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-54
                           
                           
                           
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                 
 
 
 
                           


 EXAMINING LEGISLATION TO PROTECT CONSUMERS AND SMALL BUSINESS OWNERS 
                 FROM ABUSIVE DEBT COLLECTION PRACTICES
                 
                 
                 
                 
                 



 
                    EXAMINING LEGISLATION TO PROTECT

                      CONSUMERS AND SMALL BUSINESS

                        OWNERS FROM ABUSIVE DEBT

                          COLLECTION PRACTICES

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 26, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-54
                           
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                           





                          ______                      


             U.S. GOVERNMENT PUBLISHING OFFICE 
42-354 PDF          WASHINGTON : 2020 
 
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                   
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 26, 2019...........................................     1
Appendix:
    September 26, 2019...........................................    63

                               WITNESSES
                      Thursday, September 26, 2019

Auchterlonie, Sarah, Shareholder, Brownstein Hyatt Farber Schreck    13
Bedard, John H., Jr., Owner, Bedard Law Group, P.C...............    15
Chopra, Hon. Rohit, Commissioner, Federal Trade Commission.......     5
Desai, Bhairavi, Executive Director, New York Taxi Workers 
  Alliance.......................................................     8
Gould, Rev. Dr. Cassandra, Pastor, Quinn Chapel A.M.E. Church 
  (Jefferson City, MO); and Executive Director, Missouri Faith 
  Voices.........................................................     7
Jimenez, Dalie, Professor of Law, University of California, 
  Irvine School of Law...........................................    11
Kuehnhoff, April, Staff Attorney, National Consumer Law Center...    10

                                APPENDIX

statements:
    Auchterlonie, Sarah..........................................    95
    Bedard, John H., Jr..........................................    64
    Chopra, Hon. Rohit...........................................    68
    Desai, Bhairavi..............................................    75
    Gould, Rev. Dr. Cassandra....................................   122
    Jimenez, Dalie...............................................   126
    Kuehnhoff, April.............................................   304

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of Main Street Alliance....................   344
Ocasio-Cortez, Alexandria:
    Various inserts..............................................   353


                    EXAMINING LEGISLATION TO PROTECT

                      CONSUMERS AND SMALL BUSINESS

                        OWNERS FROM ABUSIVE DEBT

                          COLLECTION PRACTICES

                              ----------                              


                      Thursday, September 26, 2019

             U.S. House of Representatives,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Meeks, Clay, Scott, Green, Foster, Beatty, 
Gottheimer, Lawson, Tlaib, Porter, Axne, Pressley, Ocasio-
Cortez, Adams, Dean, Garcia of Illinois, Garcia of Texas, 
Phillips; McHenry, Wagner, Posey, Luetkemeyer, Huizenga, 
Stivers, Barr, Tipton, Williams, Hill, Emmer, Zeldin, 
Loudermilk, Davidson, Kustoff, Hollingsworth, Rose, Steil, 
Gooden, and Riggleman.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Examining Legislation to 
Protect Consumers and Small Business Owners from Abusive Debt 
Collection Practices.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Today, the committee will examine legislation to curb 
predatory and abusive debt collection practices. Last year 
alone, the Consumer Financial Protection Bureau (CFPB) received 
over 81,000 consumer complaints about debt collection 
practices.
    Since the creation of the CFPB's Consumer Complaint 
Database, the agency has received more complaints about debt 
collection than any other issue.
    According to a CFPB survey on debt collection, nearly one 
in three Americans with a credit record was contacted by at 
least one creditor or collector trying to collect one or more 
debts during the previous year.
    In some instances, consumers are relentlessly pursued by 
debt collectors regarding debts that they no longer owe or 
debts that are not theirs. Some consumers are not informed of 
their rights under the law.
    Communities of color are disproportionately affected by 
predatory debt collectors. The CFPB's survey on debt collection 
found that people of color reported being contacted by debt 
collectors more frequently than their white peers.
    Small business owners also face predatory debt collection 
practices. Unlike consumers, small business owners do not 
currently have the same protections under the law. For 
instance, entities pursuing business debts are not covered or 
bound by the Fair Debt Collection Practices Act.
    Furthermore, small business owners may also face a 
predatory clause buried in their debt contract called a 
``confession of judgment.'' A confession of judgment is a loan 
contract that forces the borrower to waive defenses they could 
lawfully use in court.
    Predatory debt collectors have used this tactic to force 
courts to rule against borrowers regardless of the specifics of 
the case. This has resulted in garnished wages, and seized 
property, at times without the knowledge and consent of the 
small business owner.
    The New York Times highlighted how this problem has 
impacted New York City. New York City's taxi medallion drivers 
have needlessly suffered at the hands of predatory debt 
collectors and contract agreements.
    Given the impact of predatory debt collection practices on 
Americans across the country, it is particularly important for 
the CFPB to stand up for consumers. Unfortunately, the CFPB's 
proposal to address predatory debt collection, which was 
released in May of this year by Director Kraninger, fails to 
protect Americans from harassment by debt collectors.
    Under the CFPB's proposal, debt collectors would be allowed 
to send unlimited emails and text messages to consumers, and to 
call them up to 7 times a week, per debt, to collect debts.
    The rule fails to address consumer privacy concerns and 
fails to protect consumers against debt collection attorneys 
who make misleading statements in court documents. The rule 
also does not go far enough to create strong guidelines to 
ensure that consumers receive disclosures or to protect 
consumers against the collection of time-barred debt.
    This is an unacceptable failure by our consumer watchdog, 
which simply must do more for hardworking American consumers.
    Today, we will hear from a group of expert witnesses, and 
discuss several legislative proposals that have been put forth 
by members of the committee in order to better protect 
consumers and small business owners from predatory debt 
collection practices.
    I look forward to the testimony of our witnesses, and to 
advancing solutions to address this pressing issue.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 5 minutes for 
an opening statement.
    Mr. McHenry. Thank you, Madam Chairwoman.
    And thank you to the witnesses for being here.
    A CFPB study conducted in 2017 found that 63 percent of 
consumers said they were contacted too frequently by debt 
collectors or creditors. In 2018, the Consumer Financial 
Protection Bureau received more than 81,000 consumer complaints 
related to debt collection. In some cases, the CFPB and the 
Federal Trade Commission received complaints from consumers 
being called anywhere from 7 to 20 times a day.
    The data proves that consumers aren't happy with debt 
collectors. So, we can all agree there is a problem. The 
current regime does not work for the American people.
    One cause could be the Fair Debt Collection Practices Act 
(FDCPA), the principal statute governing debt collection 
activity.
    The FDCPA was signed into law by President Carter in 1977--
1977 also is the year that Apple Corporation was incorporated. 
And so it is fair to say that much has changed in terms of 
technology and how society interacts since that time.
    The CFPB recognizes the need to modernize the FDCPA and the 
rules surrounding debt collection. Despite what you will hear 
today from my friends on the other side of the aisle, the CFPB 
is working to fix this problem for the benefit of the American 
consumer.
    The proposed rule addresses the use of newer technologies, 
establishes clear bright-line rules limiting call attempts and 
telephone conversations, and clarifies consumer protections, 
disclosure requirements, and communications with consumers. 
That includes opt-out instructions in every email, text 
message, or other electronic communication.
    It also addresses the standard for contact through social 
media platforms and requires a collector to communicate with a 
consumer about a debt before furnishing information to a 
consumer reporting agency.
    How consumers want to be contacted is different now than 
what was contemplated in the existing rule, so let's 
acknowledge that. Text messages, well, if you want to talk to a 
millennial, text them. Trying to get them to answer the phone, 
give me a break, it's not possible.
    So in short, the CFPB's proposed rule offers certainty for 
consumers and clear rules of the road for debt collectors. 
Given the discussions we have had in this committee this year, 
I am surprised that more of my colleagues are not commending 
the steps taken by Director Kraninger.
    This modernization isn't just important to consumers. Small 
businesses in America and healthcare providers across this 
country depend on third-party collectors to manage receivables 
and ensure that they are compensated for services that have 
been provided.
    Federal, State, and local governments also depend on the 
collections industry for tax payments. Government-related debts 
represent 16 percent of all debt collections. So, we need to 
think about the taxpayers in this term as well, because that 
means that the vast majority of taxpayers are paying on time, 
and they would see their taxes go up if there is not a way to 
collect from those who are not paying.
    That money, which covers everything from unpaid parking 
tickets to unpaid taxes, is better spent on things like 
infrastructure and education rather than just letting those who 
aren't paying, not pay.
    Madam Chairwoman, the reality is that prices increase for 
all when some decline to pay. Methods for debt collection can 
and should improve. But we must allow for modernization that 
appropriately accounts for the vast changes in technology and 
the way that consumers wish to be communicated with.
    I look forward to a productive hearing, and I thank our 
witnesses on this vast panel for appearing.
    Chairwoman Waters. I now recognize the Chair of our 
Subcommittee on Consumer Protection and Financial Institutions, 
Mr. Meeks, for 1 minute.
    Mr. Meeks. Thank you, Chairwoman Waters, for calling this 
important hearing.
    In many ways, this hearing is an important capstone to a 
series of hearings held in the committee and the subcommittee 
this year. Indeed, in the Full Committee, the chairwoman has 
held hearings on the student loan crisis, which is straining an 
entire generation, as well as a hearing exploring a whole host 
of problems with credit rating agencies and the FICO score. The 
credit rating agencies have not only divulged data on a large 
share of the American population, but often report false and 
inaccurate data on consumers, negatively impacting millions of 
borrowers.
    Another hearing was held on the CFPB, which, under the 
current Administration, is abandoning its core mission to 
protect vulnerable consumers.
    In the subcommittee, I have chaired hearings on payday 
loans, as well as the Community Reinvestment Act, and ongoing 
discriminatory practices in lending. Across-the-board, we see 
how consumers and borrowers, particularly in communities of 
color, are vulnerable to abusive and predatory practices.
    Consideration of debt collection practices is critical as 
we consider the circumstances of American families, 40 percent 
of which struggle to make ends meet on a monthly basis.
    I yield back.
    Chairwoman Waters. I now recognize the ranking member of 
the subcommittee, Mr. Luetkemeyer, for 1 minute.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    Before I begin, I would like to welcome my constituent, the 
Reverend Dr. Cassandra Gould, from the Third Congressional 
District of Missouri. Thank you for appearing before the 
committee. I look forward to discussing this important topic 
with you as we go forward.
    Millions have forgotten that debt collectors were once the 
legal businesses targeted by the Obama Administration's harmful 
Operation Choke Point. However, just yesterday, all of the 
Majority members of this committee voted in support of the Safe 
Banking Act, which contains language to end Operation Choke 
Point and stop villainizing these businesses.
    I think we can all agree we have a responsibility to ensure 
that consumers and small businesses are protected from abusive 
debt collection practices, but we cannot forget the important 
role debt collectors play in our economy and for American small 
business owners.
    The CFPB's recent rule governing debt collection practices 
outlines small changes that would make a real difference to 
American consumers, including the ability to opt out of debt 
collection emails or text messages, and caps on the number of 
phone calls.
    I thank the witnesses for appearing, and I look forward to 
a robust discussion on ways to modernize and responsibly 
regulate debt collection across the nation.
    With that, Madam Chairwoman, I yield back.
    Chairwoman Waters. I want to welcome today's distinguished 
panel of witnesses: the Honorable Rohit Chopra, Commissioner, 
Federal Trade Commission; the Reverend Dr. Cassandra Gould, 
Pastor, Quinn Chapel A.M.E. Church in Jefferson City, Missouri, 
and executive 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.
    Without objection, each of your written statements will be 
made a part of the record.
    For purposes of testimony, each of you will have 5 minutes 
to summarize your testimony. When you have 1 minute remaining, 
a yellow light will appear. At that time, I would ask you to 
wrap up your testimony so we can be respectful of both the 
witnesses' and the committee members' time.
    Commissioner Chopra, you are now recognized for 5 minutes 
to present your oral testimony.

STATEMENT OF THE HONORABLE ROHIT CHOPRA, COMMISSIONER, FEDERAL 
                        TRADE COMMISSION

    Mr. Chopra. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for holding this hearing, 
especially as it relates to the $1.6 trillion student loan 
market.
    Since the eruption of the financial crisis and its 
decimation of the U.S. economy a decade ago, unemployment has 
come down and the stock market is soaring. But the headline 
statistics obscure the serious cracks in our economy. Stagnant 
wages and rising costs mean that Americans are walking on an 
economic tightrope where even a tiny jolt can send them into a 
free fall.
    According to multiple estimates, there are more than 70 
million Americans with past-due bills in collections. Too 
often, our system treats these individuals as if they are 
morally bankrupt or free-riding, and the reality is so much 
different. Many are battling medical bills that they may not 
even owe due to a bureaucratic stalemate between their 
insurance company and their hospital. Others fell behind on 
utility bills or other household expenses after losing a shift 
at work. And some are even jailed for not paying fees and 
fines.
    Many small businesses, who are looking to weather a slow 
season, got caught up in lending schemes that ended up 
destroying them and their business. And many people simply 
finished school at the wrong time, entering the workforce with 
a job that barely puts them on a path to pay off their student 
debt.
    Prior to serving as a Federal Trade Commissioner, I was 
proud to be appointed by the Secretary of the Treasury as the 
Consumer Financial Protection Bureau's first student loan 
ombudsman, where I led the agency's work on behalf of student 
loan borrowers.
    During my time at the CFPB, we published widely cited 
reports detailing the devastating impact of student loan debt 
and pursued an aggressive enforcement agenda against law-
breaking companies in this industry.
    Later, I served as a special adviser to the Secretary of 
Education, where I saw firsthand how much influence and power 
government contractors have over our student loan system.
    There are roughly 9 million Americans in default on a 
Federal student loan, with many more in serious delinquency, 
and the Federal Government makes sure they know it. The 
Department of Education student loan arm is one of the largest 
financial institutions in the world. The government hires a 
squadron of financial institutions to aggressively pursue 
borrowers by slamming their credit, levying hefty fees, and 
humiliating them with their employer.
    Student loan companies should be helping borrowers get back 
on their feet by advising them of all of the options for 
managing their student debt. But instead, I have seen how these 
companies have steered borrowers in a direction that benefits 
their bottom line.
    And here is the irony. When student loan borrowers make a 
mistake, they pay dearly for it. They may not be able to pass 
an employment verification check or rent an apartment. But when 
student loan companies make mistakes and violate the law, the 
Department of Education often covers for them and continues 
lavishing them with valuable contracts and subsidies.
    This is not a recent phenomenon. It has been going on for 
years under multiple Administrations and multiple parties. 
These policies are exacerbating the racial wealth gap and 
undermining the American Dream.
    The CFPB must act to address these serious problems, too. 
We must ensure that companies that break the law face real 
consequences, just as borrowers sometimes do. Congress also 
needs to clean up the Department of Education's student loan 
branch so that it puts borrowers, taxpayers, and our economy 
ahead of contractors' profits.
    We have to wake up to the realities of our broken student 
loan debt collection system and fix it. And outside of student 
lending, I believe the Federal Trade Commission (FTC) also 
needs to act, especially where the CFPB cannot.
    Technology has made it easier for lenders and debt 
collectors to seize cars without warning. Despite receiving 
authority in 2010 to put common-sense rules into place to 
combat abuses here, the FTC has not yet made a proposal.
    The FTC also has unique jurisdiction to attack debt 
collection and discrimination issues in the small business 
lending market, and we should look to restrict terms like 
``confession of judgment'' that the FTC banned in consumer 
loans long ago.
    And the FTC also needs to scrutinize the role of big tech 
on everything from algorithms to alternative currencies, like 
Facebook's Libra, and how ad networks can profit from debt 
collection scams. All of us need to act.
    Thank you. And I look forward to your questions.
    [The prepared statement of Commissioner Chopra can be found 
on page 68 of the appendix.]
    Chairwoman Waters. Thank you, Commissioner Chopra.
    Reverend Gould, you are now recognized for 5 minutes to 
present your oral testimony.

STATEMENT OF REVEREND DR. CASSANDRA GOULD, PASTOR, QUINN CHAPEL 
  A.M.E. CHURCH (JEFFERSON CITY, MO); AND EXECUTIVE DIRECTOR, 
                     MISSOURI FAITH VOICES

    Rev. Gould. Good morning, Chairwoman Waters, and members of 
the committee.
    I have come to represent the faith community who is doing 
our part in trying to uplift the burden that many Americans 
face. I am a member of the Faith and Credit Roundtable Steering 
Committee of the Center for Responsible Lending, a founding 
member of Faith for Just Lending, and I come here today as a 
faith leader who serves on the front line of those fighting 
against financial predation and as a person who is often 
entrusted with the painful stories of shame and trauma that is 
experienced by hardworking individuals who are preyed upon by 
bad financial actors, and often seem to have their dignity 
disregarded by the predatory practices of debt collectors.
    Prior to being called into full-time ministry, I spent 
approximately 17 years in the financial industry. During this 
time, I became painfully aware of the increasingly harmful 
practices of debt collectors as well as the increasingly 
predatory practices of lenders, especially payday lenders.
    In my role as pastor, activist, and public theologian, I 
advocate for economic justice and racial equity. It is through 
this work that I have been extremely familiar with the work of 
the Consumer Financial Protection Bureau.
    On June 2, 2016, I was a panelist at the hearing held in 
Kansas City to discuss what would become the payday rule. Since 
that time, I have been in constant communication, and have met 
with each of the Bureau's Directors--Director Cordray, Director 
Mulvaney, and now Director Kraninger--multiple times.
    In each of those conversations, I have admonished them to 
actually just live up to their name, to be a bureau that 
actually protected consumers.
    I am here today to express my concern and represent the 
faith community in our collective concerns about the current 
proposed rule and to share stories from families and 
individuals suffering in Missouri where, according to the 
National Consumer Law Center, 31 percent of the residents of 
Missouri are in debt collection. Missouri is a State that is 83 
percent white, but 65 percent of the residents who are in debt 
collection are people of color and African Americans.
    In the Book of Proverbs 22:22, we are reminded not to 
oppress or exploit poor people because they are poor. I believe 
that this proposed rule legalizes the exploitation of some of 
the most vulnerable members in society. The harassment and 
abuse hurts all families, but wreaks disproportionate harm on 
families of color where systemic discrimination in housing, 
employment, and financial services already persist. Debt 
collection, collection lawsuits, and judgments and wage 
garnishments are more common in communities of color.
    Forty-five percent of borrowers living in areas that are 
predominantly communities of color had debt in collections 
versus 27 percent of those living in predominantly white areas, 
and that information is according to the Urban Institute.
    In the State of Missouri, where I serve in Jefferson City, 
we suffered a tornado that damaged and destroyed over 513 
residences, and it is evident even now that some people are 
struggling to get back into housing because of zombie debts 
that are coming up on their credit report because of debt 
collectors. And now, some of those people are facing 
homelessness.
    And so again, I am here to represent those stories and to 
hold the CFPB accountable to actually protect consumers.
    [The prepared statement of the Rev. Dr. Gould can be found 
on page 122 of the appendix.]
    Chairwoman Waters. Thank you very much, Reverend Gould.
    Ms. Desai, you are now recognized for 5 minutes to present 
your oral testimony.

 STATEMENT OF MS. BHAIRAVI DESAI, EXECUTIVE DIRECTOR, NEW YORK 
                     TAXI WORKERS ALLIANCE

    Ms. Desai. Thank you, Madam Chairwoman, and good morning, 
all Honorable Members of Congress.
    I, myself, and 15 of my brothers drove down this morning at 
3 a.m. from New York City to represent the interests of a 
workforce that is deeply in crisis.
    Debt is basically a life sentence to poverty. And for 
drivers, it means that they have been handcuffed to the wheel 7 
days a week, for 14-hour shifts.
    Mr. McHenry. Madam Chairwoman, if the testimony will 
suspend.
    Chairwoman Waters. Thank you, Ranking Member McHenry.
    He is absolutely correct. You may not display your signs in 
the hearing room. Would you kindly put them down, please?
    Mr. McHenry. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    Ms. Desai. As I was saying, debt is a life sentence to 
poverty. And for drivers, it means that they have been 
handcuffed to the wheel 7 days a week, for 12- to 14-hour 
shifts.
    There have been so many stories of drivers having multiple 
heart attacks and not being able to take even a day off after 
they have left that hospital, or going straight from chemo 
sessions or kidney dialysis back to the wheel, to driving. And 
even then, what they are facing is lifelong debt.
    On average, medallion owner-drivers in New York City pay 
about $3,500 a month today in mortgage payments for that 
medallion, which is just a license from the City of New York 
that allows you to operate a yellow cab for commercial 
purposes, with the exclusive right to street hail.
    Between 2004 and 2014, through 16 auctions, the City of New 
York made $850 million from the sale of these medallions. The 
City counted its money. The banks, the lenders, and the brokers 
that made fees from these sales from interest-only payments 
have also been able to count their money. Meanwhile, the men 
and women who entered into these agreements are all now in 
lifelong debt.
    As the market value of the medallions has fallen--at one 
point, it had been a million dollars a couple of years ago, to 
now less than $150,000--the only negotiations we are seeing 
from the lenders is to reduce payments from, let's say, $3,500 
a month, to $1,500 a month, with the criteria that that 
agreement is now extended from 15 years to 50 years.
    For 50 years, you are left in debt. It is absolutely 
demoralizing, and you feel the weight of it.
    There were 9 driver suicides in New York City in 2018. 
Among the drivers, 3 were owner-drivers, who represent 2 
percent of the total workforce, but were among 33 percent of 
the drivers whose despairs has led to suicide.
    And they are not alone. The real stories are the tens of 
thousands of drivers we see today who are really dying a slow 
death from despair, from stress, and from the crisis of this 
debt.
    Confessions of judgment have basically meant that when this 
market started to fall, drivers were told that they had to pay 
the total sum of what was owed on that debt; they had to 
produce $350,000 to $400,000 overnight.
    There are so many stories of people who went into a panic 
mode, afraid that if they did not pay up, they may lose their 
house, or they may not be able to get another loan for their 
kid's student loan. It is a vicious cycle.
    And we need to address predatory lending practices where, 
in our case, brokers and lenders knew that the value was 
inflated. Some of these lenders were, in fact, plotting to 
leave the industry at the same moment in time that they were 
luring individual drivers, a workforce of 90 percent 
immigrants, into the same industry that they were trying to 
leave.
    Banks who were no longer able to loan in the housing market 
because of the role they played in the mortgage crisis entered 
into our industry and took advantage of this workforce.
    We need to address both the predatory practices, and the 
fact that seven government agencies knew. They made a profit 
for the City, they watched our people go deep into poverty and 
lifelong debt, and we have seen heart attacks and suicides, and 
they did nothing about it. And that is really at the heart of 
the issue today.
    This is a debt that itself needs to be addressed by the 
City of New York. They need to put some money on the table, and 
buy back these loans, or refinance them at the current market 
value, so that individual owner-drivers are no longer in debt 
at an average of $600,000 while they remain in a daily, weekly 
debt of hundreds of dollars and an annual debt of $25,000 a 
year just to pay for rent and other cost-of-living expenses.
    Thank you.
    [The prepared statement of Ms. Desai can be found on page 
75 of the appendix.]
    Chairwoman Waters. Thank you very much for your testimony.
    I am going to have to say a word about the signs that are 
being held behind you.
    The Chair is responsible under the Rules of the House and 
the Rules of the Committee to maintain order and preserve 
decorum.
    In the committee room, members of the audience are reminded 
that disruption of congressional business is a violation of 
Federal law and an offense. We welcome and encourage your 
presence, but we cannot accept disruptions.
    So, I thank you. I know that you are anxious to have your 
message seen by all of the Members, but if you would just keep 
your signs down. We do want to hear the testimony, and we are 
very appreciative for your patience.
    With that, I want to thank you, Ms. Desai.
    And, Ms. Kuehnhoff, you are now recognized to present your 
oral testimony.

STATEMENT OF APRIL KUEHNHOFF, STAFF ATTORNEY, NATIONAL CONSUMER 
                           LAW CENTER

    Ms. Kuehnhoff. Chairwoman Waters, Ranking Member McHenry, 
and members of the committee, thank you for inviting me to 
testify today regarding how to protect consumers and small 
business owners from abusive debt collection practices.
    I offer my testimony here on behalf of the low-income 
clients of the National Consumer Law Center.
    Across the United States, contact with debt collectors is a 
common experience for consumers. In 2017, 71 million Americans 
with a credit report, about one in three, had one or more debts 
in collection reported on that credit report. In predominantly 
non-white areas, that number is even higher, with 45 percent, 
nearly one in two consumers, with one or more debts reported on 
a credit report.
    These numbers highlight the disproportionate and sobering 
role that debt plays in some communities. Indeed, consumer 
experiences with debt and collection vary based on income, race 
and ethnicity, ability to speak English, age, and military 
service, among other factors.
    For the vast majority of consumers who are in debt, it is 
not an unwillingness to pay their debts but a host of other 
factors that leads people into debt collection, including 
stagnant wages, job loss, divorce, health problems, predatory 
lending, and a weakening financial safety net.
    However, no matter how people end up in debt, they should 
not suffer abuse or harassment from debt collectors.
    In 1977, Congress enacted the Fair Debt Collection 
Practices Act (FDCPA) to protect consumers from abusive debt 
collection practices. Unfortunately, abusive collection 
practices are still an issue today, despite the passage of the 
FDCPA, and debt collection is frequently a top source of 
complaints from consumers to Federal and State agencies.
    Major categories of debt collection problems that consumers 
face include collection without adequate information, where 
debt collectors pursue debts without reviewing the 
documentation needed to ensure that they are collecting the 
right amount from the right person; mass filings of collection 
lawsuits, which frequently lead to default judgments against 
consumers, regardless of the merits of the case, and often 
being filed by large collection law mills; collection of time-
barred zombie debts, which cannot be collected without mistakes 
or deception; harassment; threats; privacy violations; and 
other abuses long prohibited by the FDCPA.
    The Consumer Financial Protection Bureau has the ability to 
address many of these problems through its debt collection 
rulemaking. Unfortunately, the CFPB has proposed a rule that is 
going to do more to protect debt collectors than consumers.
    Among other problems, this rule will permit excessive calls 
to consumers. It will allow electronic delivery of critical 
written disclosures without even confirming that the consumers 
can receive these important messages. It will allow collectors 
to contact consumers by email, text, and other means without 
their consent. And it will permit violations of consumers' 
privacy.
    The proposed rule will allow collection of old debts, 
leading to abuse, deception, and mistakes, and it will also 
provide safe harbors for attorneys who make false, deceptive, 
or misleading representations in court documents.
    Congress, of course, can also address these abusive debt 
collection practices and can clarify and improve the FDCPA. 
These bills that we are going to discuss today are designed to 
do just that.
    We support congressional actions on a variety of debt-
related reforms. To name a few, updating the penalties under 
the FDCPA for inflation to deter abusive conduct; clarifying 
the FDCPA's coverage with respect to what is a debt and who is 
a debt collector; protecting small business owners from 
confessions of judgment and other abusive practices; and 
conducting strong oversight over the CFPB to ensure that it is 
living up to its mandate to protect consumers.
    We are happy to work with Congress to address these and 
other debt collection problems. Thank you for the close 
attention that you are paying to these issues and for the 
opportunity to provide testimony. I look forward to your 
questions.
    [The prepared statement of Ms. Kuehnhoff can be found on 
page 304 of the appendix.]
    Chairwoman Waters. Thank you, Ms. Kuehnhoff.
    Professor Jimenez, you are now recognized to present your 
oral testimony.

  STATEMENT OF DALIE JIMENEZ, PROFESSOR OF LAW, UNIVERSITY OF 
                CALIFORNIA, IRVINE SCHOOL OF LAW

    Ms. Jimenez. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee. Thank you for holding 
this hearing and allowing me to present my views on these 
important topics.
    I am a law professor at the University of California, 
Irvine School of Law, but I am here in my personal capacity. I 
have studied consumer debt and debt collection for over a 
decade. In my experience, most consumers want to repay their 
debts. The majority feel deep shame in being unable to do so.
    Debt collection is an important part of the economy. And I 
also think most debt collectors want to do the right thing. But 
the current system penalizes collectors who try to do the right 
thing. Regulatory compliance has costs, but in the absence of 
regulation, it is risky to do the right thing if your 
competitors will do the cheap thing instead.
    The system is broken in a myriad of ways, but today I want 
to focus on just two of them: the structural data integrity 
problems in debt buying; and zombie debts.
    Once a debt is sold, the integrity of the information 
needed to collect on it--things like how much is owed, who owes 
it, at what interest rate, and when the last payment was made--
is always questionable. When debt buyers have to prove that 
they are the rightful owner of that individual's debt, and that 
the amount claimed is the exact amount owed, they have a lot of 
difficulty.
    This is a classic collective action problem perfectly 
suited for regulation. I am not alone in saying this. Financial 
institutions and debt buyers have urged the same in comments to 
the CFPB. Unfortunately, the CFPB missed the opportunity to fix 
this in its current rules.
    My written testimony contains a more complete proposal, but 
I urge this committee to consider legislation that would 
clarify that debt buyers are subject to the FDCPA, as you have 
a bill, H.R. 403, but also add original creditors to the list 
and require those creditors who sell debt to stand behind the 
accuracy of the information that they sell, and to provide 
account documents at the time of sale, and also to prohibit 
debt collectors from contacting a consumer until they have 
engaged in due diligence about the sales contract and account 
documentation.
    To deter illegal conduct, I also urge this committee to 
favorably report H.R. 3948 (the Debt Collection Practices 
Harmonization Act), and adjust FDCPA statutory damages to 
inflation.
    The second structural problem I want to urge you to fix is 
what is colloquially called ``zombie debts.'' Currently, a debt 
can follow a consumer for way too long, in some cases 
practically forever, as you have heard.
    My proposal here expands upon the draft bill entitled, 
``Strengthening Legal Protections on Debt Collection Actions.'' 
That bill prohibits the restart of the statute of limitations 
clock every time a consumer makes a payment or acknowledges a 
debt. It is a great start.
    But I would urge this committee to go further and support a 
single Federal collection period that extinguishes consumer 
debts once and for all after a specified period. I suggest 7 
years to comport with the Fair Credit Reporting Act.
    This law would automatically extinguish not simply the 
legal remedy of collecting through the courts, which is what 
statutes of limitation do, but any kind of repayment. Judgments 
would get a separate statute of limitations. I also suggest 7 
years, for simplicity. When the applicable period expires, the 
debtor's obligation to the creditor and the creditor's rights 
to collect cease to exist. Any judgment obtained on what would 
be an extinguished debt would be void and consumers would have 
a private right of action against the collector.
    Collectors would have 14 years to collect on a consumer 
debt, and if they are not able to secure repayment in those 14 
years, the debt would be extinguished and attempts to collect 
would expose them to consumer lawsuits with statutory penalties 
and fees.
    The law in this area is too complex. I thought I was a 
pretty savvy consumer when I was 21 years old, and I was 
bullied by a debt collector into paying a debt I did not owe. I 
was an authorized user on a credit card debt, but the collector 
led me to believe that I would be sued over this debt by the 
end of the week.
    If wasn't until years later that I learned that authorized 
users are not responsible for credit card charges, particularly 
if they never used the card. You might chalk up this incident 
to the naivete of youth, but I have seen many fall prey to this 
complexity, and not just consumers.
    In 2014, I reviewed the case of Mr. Okoroafor in 
Massachusetts, a 73-year-old retiree who was sent to jail for 
30 days for refusing to pay a $500 debt. Mr. Okoroafor had 
testified that his sole source of income came from a State 
pension, but neither he nor apparently the district judge who 
sent him to jail knew that State law exempted that income from 
collection.
    Consumers and collectors, and judges, quite frankly, need 
simplicity. A Federal statutory collection period that cannot 
be restarted, and that applies to all consumer debts, would be 
a good start.
    Thank you for the opportunity to share my thoughts with you 
today. I look forward to your questions.
    [The prepared statement of Ms. Jimenez can be found on page 
126 of the appendix.]
    Chairwoman Waters. Thank you, Ms. Jimenez.
    Ms. Auchterlonie, you are now recognized to present your 
oral testimony.

STATEMENT OF SARAH AUCHTERLONIE, SHAREHOLDER, BROWNSTEIN HYATT 
                         FARBER SCHRECK

    Ms. Auchterlonie. Chairwoman Waters, Ranking Member 
McHenry, and committee members, thank you for inviting me to 
discuss accounts collections in the consumer and small business 
marketplaces.
    Smart regulation of debt collection is essential. On the 
one hand, deceptive and harassing conduct must not be 
tolerated. On the other hand, regulation must ensure that small 
businesses can provide services when consumers don't have the 
cash, with the trust that they will later get paid.
    Without a healthy collections market, consumers will lose 
affordable access to dentists, healthcare, housing, and 
traditional credit products.
    Previously, I was an attorney with the U.S. Treasury's 
Office of Thrift Supervision, and later was a founding employee 
and acting Deputy Enforcement Director with the Consumer 
Financial Protection Bureau. For years, I led a team of 
enforcement attorneys in investigations and litigations, 
including FDCPA matters.
    After moving to Denver, Colorado, I co-authored the legal 
treatise, ``Consumer Finance Law and Compliance,'' and two 
Governors of the State of Colorado have appointed me to 
represent the citizens of the State at large on the Colorado 
Banking Board, the policy and rulemaking body for Colorado's 
banking system.
    Congratulations on the passage of the Safe Banking Act, by 
the way.
    At the CFPB, I observed a wide variety of debt collection 
practices. In private practice, I have helped the ARM (accounts 
receivable management) industry clients enhance their 
compliance systems. I have listened to probably thousands of 
debt collection calls in these efforts. And most recently, I 
worked with dozens of ARM industry members to help draft a 154-
page comment to the CFPB's Regulation F to implement the FDCPA.
    From these experiences, I have learned that debt collection 
has become increasingly a profession that provides consumers 
with flexible options for resolving debts. Empathy and problem-
solving are key tactics. And the collections industry is one of 
the most diverse in financial services: 32 percent of 
collection agencies are woman-owned, and over 70 percent of the 
workforce is female.
    Significantly, valid disputes are rare, and early contacts 
pay off for consumers. Thirty percent of all debt is early-out 
debt, meaning that as soon as the customer is contacted, he or 
she pays it. In most cases, this avoids credit reporting and 
collection lawsuits. It is a customer service call more than a 
collection call.
    When those early contacts can't happen due to call 
blocking, call avoiding, call caps, or other impediments, 
consumers lose the chance for a quick, harmless fix. Limiting 
meaningful communication about accounts ultimately harms 
consumers.
    Congress enacted the FDCPA in 1977, and the statute's text 
still refers to telegrams. Forget email and text. As you can 
guess, agencies struggle to meet consumer preferences for 
contact methods, like email or text, because the law 
surrounding their use is unclear. Electronic messaging is 
efficient, reduces third-party exposure, and is more likely to 
be opened and actually provide consumers information about 
their important statutory rights.
    Email is a superior tool, but without straightforward 
regulations, it can't be used. Personal telephone contacts are 
also important. Over the phone, agents can tell consumers about 
how to verify coverage with health insurance companies, to 
apply for creditor hardship programs, or enter into an 
affordable payment plan.
    The key here is protecting consumer choice. Consumers must 
participate in conversations about how to resolve their debt. 
And consumers should keep the choice to select the methods they 
want to use to talk about it: email; text; or telephone.
    Fortunately, under both the CAN-SPAM Act (Controlling the 
Assault of Non-Solicited Pornography and Marketing Act of 
2003), and the FDCPA, consumers retain their rights, 
respectively, to opt out of the communication method, just as 
they would with any other commercial message, or choose to 
completely cease and desist contacts from collectors. Further 
regulations that make consumer choice harder to implement 
should be discouraged.
    As a former government enforcement attorney, and someone 
who now represents consumers pro bono, I urge everyone in this 
body to view with skepticism arguments from organizations 
against adding clarity and uniformity to the FDCPA. We need 
model forms, safe harbor voicemails, and uniform agreements 
about language where the FDCPA is ambiguous.
    When the legal regime governing the ARM industry is clear, 
reflects consumer preferences, and is designed to give 
consumers control over how their debts are resolved, it 
benefits consumers, collectors, and creditors alike.
    Thank you.
    [The prepared statement of Ms. Auchterlonie can be found on 
page 95 of the appendix.]
    Chairwoman Waters. Thank you very much, Ms. Auchterlonie.
    Mr. Bedard, you are now recognized to present your oral 
testimony.

STATEMENT OF JOHN H. BEDARD, JR., OWNER, BEDARD LAW GROUP, P.C.

    Mr. Bedard. Chairwoman Waters, Ranking Member McHenry, and 
House Financial Services Committee members, my name is John 
Bedard. Thank you for inviting me to testify about the work of 
the credit and collection industry.
    This is a very important time for consumers and debt 
collectors in the wake of the Bureau's landmark release of the 
first-ever proposal for rules implementing the Fair Debt 
Collection Practices Act (FDCPA).
    The credit and collection industry has been seeking clear 
regulatory guidance on the FDCPA since its enactment in 1977. 
The industry supported regulation in 1977, and the industry 
supports clear, fair regulation today.
    The Federal Trade Commission, the previous primary agency 
with jurisdiction over the debt collection industry, did not 
have rulemaking authority under the FDCPA. As a result, this 
lack of regulatory guidance, in conjunction with Congress' 
failure to update the statute, has resulted in outdated 
requirements and a patchwork of interpretations of the FDCPA by 
courts throughout the country.
    The absence of clear regulation has also given birth to a 
cottage industry of consumer attorneys who have done little to 
protect consumers.
    The Dodd-Frank Wall Street Reform and Consumer Protection 
Act gave the CFPB rulemaking authority. The Bureau's proposal 
for implementing the FDCPA, although imperfect in many 
respects, is an important step forward in providing much-needed 
clarity to the financial services marketplace, including 
consumers.
    I have been practicing law in Georgia for over 20 years. My 
practice focuses on representing debt collectors, asset buyers, 
creditors, and attorneys. I help clients stay in compliance 
with the myriad of Federal and State laws regulating their 
business. I also defend civil litigation and investigations 
brought by consumers and by government.
    In my role as managing attorney at Bedard Law Group, I am a 
recognized authority on the FDCPA and the Fair Credit Reporting 
Act. I am also a former member of the board of directors of the 
industry's leading professional trade association, ACA 
International, the Association of Credit and Collection 
Professionals.
    I serve as the State of Georgia compliance chairperson for 
ACA International, and I am a former chairperson and Program 
Designation Award recipient of ACA International's Members 
Attorney Program. I travel the country auditing the compliance 
practices of debt collectors and educating them on the 
requirements of consumer financial laws.
    Debt collectors play a critical role in ensuring that 
consumers can continue to access credit and services. A healthy 
connection between debt collectors and consumers increases 
access to credit. It encourages the local appliance store to 
sell that washing machine on terms, it encourages the local 
dentist to provide those braces on the promise of future 
payment, and it gives comfort to the auto mechanic that they 
will be paid tomorrow for their repairs today.
    I have seen firsthand the problems a lack of clear 
regulatory guidance can create for both consumers and industry, 
and the CFPB has at times exacerbated these problems through 
unfair, agenda-driven enforcement actions.
    Regulation by enforcement is wrong, it is unlawful, it is 
happening today, and it needs to stop.
    To fulfill its statutory mission and obligations properly, 
the Bureau must first articulate rules and then strictly adhere 
to fair, clear, and transparent enforcement practices.
    I have represented clients and personally observed the 
Bureau's actions fall short of these standards. Many targets of 
Bureau enforcement actions have experienced one-sided Bureau 
interpretations of the law and are often pressured into onerous 
settlement terms, which impose obligations well beyond legal 
requirements, just to avoid the extreme cost associated with 
disrupting business operations and defending allegations.
    The conveniences of modern technology can no longer be 
ignored. The Bureau's proposal appropriately acknowledges the 
need to bridge the communication gap between consumers and debt 
collectors.
    There can be little dispute that clear, fair regulation of 
the industry helps consumers and industry. The Bureau's 
proposal gives unconditional control to consumers over the 
communication methods used by debt collectors. This control 
gives consumers unprecedented power over the debt collection 
process while at the same time building a stronger technology 
bridge between consumers and debt collectors.
    Thank you again for the opportunity to appear before this 
committee. I look forward to answering your questions.
    [The prepared statement of Mr. Bedard can be found on page 
64 of the appendix.]
    Chairwoman Waters. Thank you very much.
    I now recognize myself for 5 minutes for questions. And I 
am going to start with you, Mr. Chopra.
    You heard what Mr. Bedard just said about the Consumer 
Financial Protection Bureau, an important step forward. You 
heard what Mr. McHenry said about the Bureau. As I understand 
it, you did work there. You were employed at the Consumer 
Financial Protection Bureau?
    Mr. Chopra. Yes, for approximately 5 years.
    Chairwoman Waters. In what capacity?
    Mr. Chopra. I oversaw all of the student lending and 
financial services work. I was also student loan ombudsman 
during that time.
    Chairwoman Waters. So, you know something about debt 
collection?
    Mr. Chopra. Yes.
    Chairwoman Waters. All right. In your opinion, are agencies 
like the CFPB and the FTC taking appropriate measures and 
enforcing policies that can guide consumers in addressing their 
complaints or harassment?
    Mr. Chopra. I think recently, enforcement has been pretty 
tepid, and all that does is benefit bad actors and harm those 
who follow the law.
    Chairwoman Waters. Ms. Desai, you were very passionate 
about what is going on in New York, and I think we all heard 
you. We have a number of New Yorkers here on the panel of 
members. So, I am going to skip over that and let them address 
what you shared with us.
    But let me go to Ms. Jimenez. You talked about having been 
involved in researching and working in debt collection for 
years.
    Ms. Jimenez. Yes.
    Chairwoman Waters. What do you think can be done to 
absolutely recognize that there is debt, and debt owed by 
individuals that oftentimes, they can't pay because they don't 
have the money? What do you think can be done to stop the 
harassment, to stop the continuous calls and emails, et cetera, 
and at the same time, credibly try and get your debt repaid?
    Ms. Jimenez. I think the difficulty is in determining who 
can pay but doesn't want to, and who cannot pay. And I think 
there are a lot more ``cannots'' than the industry would hope.
    A lot of people really simply--they may have a little money 
left, but it is a question of, do you use that for food or for 
your kids' activities or do you use that to pay off a credit 
card?
    Chairwoman Waters. You gave an example of the $500 of the 
70-something-year-old gentleman who is excluded, who cannot be 
forced to pay, given his income. Are there other instances of 
that?
    Ms. Jimenez. Yes, exemption laws or statutes of 
limitations, if they work better than they do now, would 
basically cut off the right and give us a specified period for 
only specified types of income, nonexempt income for debt 
collectors to seize.
    The problem with many of these things is that they require 
the consumer to show up and to actually assert their rights. 
Anything that requires that, in my experience, is going to harm 
the consumer because they are unlikely to do it.
    Chairwoman Waters. So, there is no such thing as an 
ombudsman in the court to represent those who can't very well 
represent themselves, is that right?
    Ms. Jimenez. This is throughout the 50 States, et cetera, 
and so some courts have lawyer-for-the-day or clerk's offices 
that try to help people.
    But the vast majority of people are disheartened by their 
debts. They know that they have not repaid someone. The 
question is, is the person who is suing them the right party to 
pay? And that is a real question that, because they are unable 
to show up, they never actually get to ask.
    Chairwoman Waters. Reverend Gould, you are here from 
Jefferson City, Missouri, is that right?
    Rev. Gould. Yes, Chairwoman Waters.
    Chairwoman Waters. We have a Member here who represents 
that area.
    And you talked about minorities disproportionately being 
harassed. Is this true in Jefferson City, and how do you know 
this?
    Rev. Gould. It is absolutely true. I pastor the oldest 
African-American entity in Jefferson City. My church is 169 
years old. And we are situated down the street from an 
Historically Black College, Lincoln University. And so, I am 
the pastor of the community.
    And oftentimes, my parishioners, students and others find 
their way to the church to share burdens and to ask for relief. 
Oftentimes, benevolence is extended, sometimes to help people 
avoid going to court.
    In the aftermath of the tornado that we just had, I am 
thinking of a young woman by the name of Lakaisha McCaleb. She 
is an AfricanAmerican woman who owned the only 24-hour daycare 
center in Jefferson City, and took care of approximately 75 
children, most of them African American and children of color. 
And she found herself--she did not own the building, she owned 
the business, and cannot get another building because of past 
credit issues that are in collections.
    Chairwoman Waters. Thank you very much.
    I now recognize the gentleman from North Carolina, Ranking 
Member, McHenry, who is recognized for 5 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman.
    I just have a question, leaving a voicemail, should that be 
a safe thing for a debt collector to do?
    Commissioner Chopra?
    Mr. Chopra. I think it depends on the specific 
circumstances.
    Mr. McHenry. What do you mean? Let's say, I leave you one 
voicemail, once a week. Let's just try that concept. Is that 
acceptable?
    Mr. Chopra. I think the challenge is that--
    Mr. McHenry. How about a text?
    Mr. Chopra. --if you leave the voicemail for someone who is 
not the actual person with the debt--
    Mr. McHenry. Okay. So, let me give you the scenario--let's 
say I have your cell phone number, the cell phone number you 
gave me in order to get the loan, and I call you on your cell 
phone at the number that you gave me. Can I leave a voicemail? 
Should I be legally able to leave a voicemail on your cell 
phone that you provided me?
    Mr. Chopra. If you provided that cell phone number--you 
collected it and you have validated that you got it from the 
right person? This is the question. The details matter.
    Mr. McHenry. Okay. Then, let's say that in this scenario, I 
have communicated with you previously on this. Can I leave you 
a voicemail?
    Mr. Chopra. If you have communicated previously, and you 
have absolute accuracy about that--
    Mr. McHenry. Okay. The absurdity of ``absolute accuracy.''
    How about a text, can I text you?
    Mr. Chopra. Has the consumer opted into that?
    Mr. McHenry. I have previously texted you, and you have 
paid. Can I then follow up and do that?
    Mr. Chopra. If the consumer has opted in to what their 
preferences are on being communicated.
    Mr. McHenry. Okay. So what I am saying here is under 
previous regimes--let's go to you, Ms. Auchterlonie. Where did 
you previously work?
    Ms. Auchterlonie. Prior to private practice, I was at the 
CFPB.
    Mr. McHenry. Okay. Doing what?
    Ms. Auchterlonie. I was an acting Deputy Enforcement 
Director. I led a team of 25 enforcement attorneys in the 
investigation of--
    Mr. McHenry. Prior to the proposed rule, how many times 
could debt collectors call someone?
    Ms. Auchterlonie. I would assume it is about the same as 
what it is now, which is--
    Mr. McHenry. Under the old rule, there was no cap on the 
number of times that a consumer could be contacted.
    Ms. Auchterlonie. No, no. It is very much court-driven. The 
FDCPA has--
    Mr. McHenry. But under the rules that are written, so we 
are modifying the existing rules, is texting an innately bad 
thing?
    Ms. Auchterlonie. No, texting is not an innately bad thing. 
We have studies showing that younger generations prefer to be 
communicated to by text messages.
    Mr. McHenry. Did the previous rule contemplate text 
messaging or using a social media platform in order to 
communicate with a consumer?
    Ms. Auchterlonie. Not at all. There were no real previous 
rules. It is just the FDCPA text, which was enacted in 1977.
    Mr. McHenry. Okay. So what does the proposed rule do then? 
How does that benefit the marketplace and the consumer?
    Ms. Auchterlonie. The proposed rule takes a lot of the 
uncertainty in the current legal scheme, which for the last 40 
years has been really interpreted by the courts on a court-by-
court and then circuit-by-circuit basis, and pulls all of that 
information and consideration together to try to create one 
uniform national rule.
    Mr. McHenry. And what value does that provide?
    Ms. Auchterlonie. It provides consistency across the United 
States so that particularly, the national debt collectors can 
do the same thing in every jurisdiction.
    It also has given us, the participants in the debt 
collection industry, as well as you, yourself, the opportunity 
to evaluate, as a whole and collectively, whether or not what 
the Bureau is doing is a rational way to balance competing 
priorities in the voicemail conundrum.
    Mr. McHenry. Okay. So, that certainty provides clarity in 
terms of lending then, so you are better able to consistently 
collect debts.
    Ms. Auchterlonie. It would. I would also say it is very 
likely to reduce the number of telephone calls that a person is 
likely to get because--
    Mr. McHenry. Explain that. How is that the case? Because we 
hear the doom and gloom that if I text you, that may be a bad 
thing, or if I leave you a voicemail, that may be a bad thing.
    Ms. Auchterlonie. Yes. Currently, because of the legal 
concerns about leaving voicemails, when a collector gets a 
voicemail message or an answering machine, they often just hang 
up and say nothing, because that is safer from a legal 
perspective.
    We are all accustomed to getting those types of telephone 
calls, and they are very annoying.
    Mr. McHenry. Right. I think I just got one during this 
testimony. So, I understand. I would have preferred a text, to 
say what the heck they were going to ask me, so I can deal with 
it.
    So with that, I think it is important that we modernize the 
rule, and give clarity to the marketplace and to consumers.
    And I yield back.
    Ms. Auchterlonie. Thank you.
    Chairwoman Waters. Thank you.
    I now recognize the gentlewoman from New York, Mrs. 
Maloney, who is also the Chair of our Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets, for 5 
minutes.
    Mrs. Maloney. Thank you, Madam Chairwoman, for holding this 
very, very important hearing.
    Ms. Desai, after years of predatory lending and inflated 
medallion prices, the Yellow Cabs of New York really turned 
into financial traps for thousands of mostly immigrant drivers. 
I think it is a New York City scandal, really. And after 
several years of the worst lenders failed, the NCUA and the 
FDIC took over their portfolios of taxi medallion loans, so the 
government is now the owner of a lot of these loans, is that 
correct?
    Ms. Desai. That is my understanding.
    Mrs. Maloney. Yes. Because a lot of these loans were 
predatory to begin with, I personally think the NCUA and the 
FDIC should put an immediate moratorium on medallion 
foreclosures. That would be the decent, moral, right thing to 
do.
    But we should also look at the factors that enabled this to 
occur. So could you tell us more about some of the predatory 
lending practices--what were they, how did they occur, and the 
history of how this disaster happened?
    Ms. Desai. Sure. In the New York Times investigation, it 
had outlined that a number of the lenders knew that the value 
of the medallion was inflated, and, as I said earlier, there 
were seven government agencies that knew the value was 
inflated. There were reports at the State level from the 
Department of Financial Services for a number of years. There 
were reports by the NCUA itself, which oversaw the credits 
unions, and reports by the Taxi and Limousine Commission, which 
directly regulates the local industry. They knew the price was 
inflated, and yet they continued to auction off more 
medallions.
    In fact, in 2014, the Taxi and Limousine Commission (TLL), 
which sets the opening bid at an auction, set it at $800,000. 
Now, mind you, the same agency officials, many of them who were 
involved in setting it at that rate were the same individuals 
who then allowed companies like Uber and Lyft to come in, 
completely unregulated. And, in fact, once they left their jobs 
at the TLC, many of them then went to work directly for those 
same companies. So, that really has been what has felt like the 
trap.
    From 2002 to 2014, we also learned, primarily through the 
Times investigation, that many of the lenders were actually 
behind the scenes, plotting to leave the industry. Meanwhile, 
they would pick up the phone, call individual lease drivers--so 
drivers who had been leasing from garages, and were working 6, 
7 days a week, 12-hour shifts--and would promise them the 
American Dream. You invest in a medallion, and within 3 or 4 or 
5 years, you will be able to refinance your medallion loan and 
purchase a house, pay your kids' tuition for college, and so on 
and so forth.
    And so, those lenders really actively sold this dream. And, 
meanwhile, the government agencies, particularly the TLC, was 
taking out ads on an inflated value. Some of the government ads 
actually showed that--the claims that the ads made were 13 
percent higher in value than the actual value of the medallion.
    And imagine you are a working-class person, someone just 
really mainly trying to get out of poverty, and you are getting 
a phone call from somebody that you worked for, for years, and 
you see ads being displayed by your very own government, you 
are thinking this is a safe venture for you to enter into.
    Meanwhile, as the market started to crash, the lenders were 
not asking for credit histories. At the time that they would 
sign you up, they would not ask you for guaranties. But once 
the loans started to go underwater, when there would be a 
balloon payment--within 3 to 5 years, there is a balloon 
payment, and at that time, you are able to refinance your loan. 
During that period, the lenders would then ask you to put down 
a guaranty. They would ask you about the assets of yourself but 
also of other family members. And so, mid-loan, you are now 
finding out that everything else you own is also at risk.
    It was also mid-loan that the confessions of judgment were 
then put on the table--
    Chairwoman Waters. The gentlewoman from Missouri, Mrs. 
Wagner, is recognized for 5 minutes.
    Mrs. Maloney. Thank you.
    Mrs. Wagner. Thank you, Madam Chairwoman.
    Ms. Auchterlonie, following up on Ranking Member McHenry's 
line of questioning, are you familiar with the legislation that 
Barney Frank introduced in 2012 directing the CFPB to provide 
clarity on how debt collectors can, in fact, leave voicemails?
    The bill's purpose, as officially stated, was to ``amend 
the Fair Debt Collection Practices Act to exempt a debt 
collector from liability when leaving certain voicemail 
messages for a consumer with respect to a debt as long as the 
debt collector follows regulations as prescribed by the Bureau 
of Consumer Financial Protection on the appropriate manner in 
which to leave such a message, and for other purposes.''
    How does that differ from what the CFPB proposed for 
voicemails under Director Kathy Kraninger's, which many of my 
Democrat colleagues have opposed? I am trying to understand the 
difference here.
    Ms. Auchterlonie. Yes. Thank you. I am aware of that. And I 
appreciate you reading back the text.
    It is really, the Bureau is following the spirit of what 
that bill said. They made an effort to create what is called 
the limited content message, which, in their view, was a 
statement that is spelled out with great specificity in the 
rule that collectors would be able to leave on voicemail 
machines in order to identify themselves without doing what is 
called third-party disclosure because the FDCPA prevents debt 
collectors from disclosing to third parties the existence of 
the debt.
    The other part of the conundrum on voicemail messages is 
that the FDCPA also requires debt collectors to give what is 
called the mini-Miranda notice, which is, ``This message is 
from a debt collector.'' And I think the same may be used in 
connection with the collection of--
    Mrs. Wagner. So Kathy Kraninger, Director of the CFPB right 
now, is really trying to implement the same type of legislation 
that Barney Frank offered in 2012, if I understand it properly, 
is that correct?
    Ms. Auchterlonie. Yes.
    Mrs. Wagner. Is there is a scenario where a consumer who 
has fallen into collections could benefit from a phone call or 
an email communication from a debt collector?
    Ms. Auchterlonie. Yes. The studies show that meaningful 
conversation between a collection agency and someone in 
collections gives the consumer the opportunity to avail 
themselves of a number of choices. Often, they can settle the 
debt for less than the face value. They might be able, if it is 
medical debt, to enter into some--
    Mrs. Wagner. And there is actually a communication--
    Ms. Auchterlonie. Yes.
    Mrs. Wagner. --going on. And I would assume that 
communication with the consumer is a good thing in that 
situation, correct?
    Ms. Auchterlonie. It is. Yes.
    Mrs. Wagner. If lenders cannot collect debt, does this have 
any impact on their ability to extend credit? Specifically for 
financial institutions, such as banks and credit unions, do 
their safety and soundness requirements make it important for 
them to be able to collect debt so that they can extend credit?
    Ms. Auchterlonie. Yes. There is a clear relationship 
between impaired debts and the amount of asset growth that the 
bank regulatory agencies will allow institutions to--
    Mrs. Wagner. How does the debt-collection process impact 
both smaller and larger businesses throughout the country and 
the larger economy?
    Ms. Auchterlonie. Particularly with small businesses, a lot 
of the times the reason that they hire a debt collector is 
because they are professionals in trades--auto mechanics, 
dentists, etc.--and they just don't have the infrastructure in 
order to collect on their own accounts. And these may be small 
accounts, but together they equal $40,000, $50,000, which is a 
lot for an auto mechanic over the course of a year.
    Mrs. Wagner. Okay.
    Ms. Jimenez, I saw you nodding your head during Ranking 
Member McHenry's line of questioning. Do you agree with Ms. 
Auchterlonie's assessment, and do you see the need for 
modernization in this space, ma'am?
    Ms. Jimenez. I think we have a conundrum, and I think it is 
not easy to solve. The problem is, we want to protect--and the 
FDCPA protects--consumer privacy and the avoidance of 
disclosure of a debt to a third party. And voicemails can be a 
private thing, but they can also be a public thing, and it's 
the same with text messages.
    We also have a problem with, really, the data and the 
information that the debt collector has about the consumer and 
whether that is correct--
    Mrs. Wagner. But the collector must follow regulations 
prescribed by the Bureau, if I understand things correctly, and 
those can be laid out, correct?
    Ms. Jimenez. Sure. But right now--
    Mrs. Wagner. So, there is an opportunity for modernization, 
so that we could actually communicate.
    Ms. Jimenez. I don't think--modernization, standardization 
consistency, I think that is good for everybody. The--
    Mrs. Wagner. Wonderful. Great.
    Ms. Jimenez. --question is in the details.
    Mrs. Wagner. Thank you.
    I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from New York, Ms. Velazquez, is recognized 
for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman, and Ranking 
Member McHenry.
    Ms. Desai, do you think that if these taxi drivers knew 
about the confession-of-judgment practice, and that their 
entire account could be drained, they would have still taken 
out these taxi medallions loans?
    Ms. Desai. I think many would not have.
    Ms. Velazquez. Thank you.
    Commissioner Chopra?
    Mr. Chopra. Confessions of judgment, just for background, 
have actually been banned under the FTC credit practices rules 
for many, many years. Those rules, though, do not cover loans 
to small businesses. So the fact that confessions of judgment 
are being used, especially for small, individual businesses, 
including taxi drivers, is concerning.
    Ms. Velazquez. Thank you.
    Ms. Kuehnhoff, in response to the predatory lending 
practices against New York taxi drivers and the series of 
Bloomberg articles that ran last year, I have introduced H.R. 
3490, the Small Business Lending Fairness Act, which will 
prohibit confessions of judgment at the Federal level in 
commercial lending practices.
    Can you explain why this is something we need to implement 
at the Federal level?
    Ms. Kuehnhoff. Yes. Thank you for your question.
    As we have been discussing, many important consumer 
protections--either protections from predatory lending 
practices or predatory debt collection practices--don't exist 
for small businesses. So this bill would be a step in the right 
direction to try to bring these small businesses under those 
same types of protections that we provide for consumers, 
especially small businesses that look a lot like consumers 
because they are also particularly vulnerable.
    Ms. Velazquez. Ms. Desai?
    Ms. Desai. Yes, I would absolutely agree with that.
    Ms. Velazquez. Mr. Chopra, the Federal Truth in Lending Act 
(TILA) requires transparent disclosures in consumer finance but 
does not apply to small businesses. I am currently working on 
legislation that will expand this coverage. How would TILA 
coverage to small businesses enable them to make fully informed 
comparisons on their financing options?
    Mr. Chopra. Yes, small-business borrowers, particularly the 
smallest ones, are entrepreneurs. They would hugely benefit 
from some of the same protections that consumers enjoy as well.
    Ms. Velazquez. And, Ms. Desai, I know that Chairman Levin 
on the New York City Council has been working with the 
industry. Has there been any resolution to your case?
    Ms. Desai. No.
    And I am also a member of the city council's Medallion Task 
Force. We need to address the predatory lending practices, but, 
to be honest with you, the number-one concern for the 6,000 
owner-driver families is to have the actual debt restructured.
    It is, on average, $600,000, but the real market value, 
when hedge funds are buying off foreclosed medallions, is 
closer to $150,000. We want to see the current loans that the 
owner-driver families are under be restructured to that amount, 
and then their monthly mortgages, which right now average 
$3,500, could be reduced to even $900. With that reduction, 
they would no longer be in the annual debt of $25,000, that 
they find themselves in today.
    Ms. Velazquez. Thank you.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much.
    I will now yield to the gentleman from Florida, Mr. Posey, 
for 5 minutes.
    Mr. Posey. Thank you very much, Madam Chairwoman and 
Ranking Member McHenry, for working together to ensure that we 
guard innocent people against abusive and unfair debt-
collection practices.
    Although they are not here today, I want to commend the 
work of the Consumer Financial Protection Bureau in proposing a 
new rule to modernize the implementation of the Fair Debt 
Collection Practices Act. There may be some residual criticism 
of the Bureau's proposal, but I think the public comment 
process should bring out ideas for improving on a very good 
start.
    As we consider further concerns today, we need to keep in 
mind that bad debts are a cost to lenders, either in writing 
them off or in collecting them. Any business must cover its 
costs to stay in business, and these bad-debt costs must be 
covered. In the long run, that means higher interest rates or 
finance charges for those who actually pay their debts. Higher 
interest rates and risk to lenders mean less available credit 
to those who can and do repay their debts. We all support 
protecting debtors, but we must be careful not to push that 
debt cost so high as to restrict credit access.
    I have an abiding interest in protecting our 
servicemembers. We have a draft bill, a discussion draft, in 
front of us today that would prohibit debt collectors from 
communicating with the commanding officer or officer in charge 
of any servicemember regarding an outstanding debt. The bill 
would also strengthen related prohibitions about false or 
misleading representations to servicemembers.
    This is based on the Military Lending Improvement Act from 
the 115th Congress sponsored by the former U.S. Senator from 
Florida, Bill Nelson.
    As we look to improve this bill, what protections do we 
need to put in place to address the special needs of 
servicemembers?
    And I will start with you, Mr. Bedard, and we will go to my 
left, your right.
    Mr. Bedard. Thank you.
    I agree with you that these proposals do create a more 
healthy communication between consumers and debt collectors.
    When I read what you have proposed here, what I did not see 
in that proposal was a confirmation that consumers can actually 
consent to those communications. Consumers can consent to those 
communications under the current state of the law, and to the 
extent any proposals that changed the law preserved those 
communications, I would encourage that as well.
    Mr. Posey. Thank you.
    Ms. Auchterlonie. When I was at the CFPB, I had the great 
honor of working with Holly Petraeus, and I think she would be 
very pleased to see that this is before the committee. I 
support it.
    Ms. Jimenez. Are we going down the--
    Mr. Posey. Yes.
    Ms. Jimenez. I am not an expert in servicemember affairs. I 
do think that the bill that you have proposed is a good step.
    It is wholly inappropriate that debt collectors are able to 
talk to commanding officers. That exerts a pressure that really 
no one should be able to have. I think it is similar to debt 
collectors who could talk to employers, which really right now 
they should be only doing for location information, but there 
have been instances beyond that.
    So, I support your bill.
    Ms. Kuehnhoff. I think that the protections you have 
proposed are important and in line with those that have been 
outlined by the CFPB's Office of Servicemember Affairs.
    I would highlight two others that have been presented in 
those reports. Threatening reductions in rank and threatening 
revocation of security clearance are both issues that have come 
up in the CFPB's reports as well.
    Mr. Posey. Very good. Thank you.
    Ms. Desai. I would agree with everything that has been 
stated. It just is such an outrageous practice.
    Rev. Gould. I, too, concur that that is good ,but I also 
want to emphasize that everybody deserves that same protection. 
It reminds me of the payday lending rate cap that is available 
to servicemembers but not available to all other Americans.
    And so, it is good, and a step in the right direction, but 
it needs to be inclusive, and everybody deserves the same 
protection.
    Thank you.
    Mr. Chopra. Congressman, the only thing I would add is, the 
Department of Defense has actually done work to show how 
separations from the military due to financial distress are 
very costly, both to the taxpayers and to our national 
security. So to the extent we can go after some of the worst 
abuses, strengthen the Military Lending Act (MLA), and look at 
ways to improve the Servicemembers Civil Relief Act (SCRA), 
those are all good steps.
    Chairwoman Waters. Thank you.
    The gentleman from Georgia, Mr. Scott, is recognized for 5 
minutes.
    Mr. Scott. Thank you very much, Madam Chairwoman. And let 
me commend you on, again, having a very, very much-needed 
hearing on debt collection and the unfairness that is happening 
to all too many of our consumers.
    Mr. John Bedard, how are you? One of my Georgia 
constituents--
    Mr. Bedard. Thank you.
    Mr. Scott. --and one of our most distinguished lawyers, and 
owner of the highly respected Bedard Law Group--
    Mr. Bedard. Thank you.
    Mr. Scott. --of Duluth, Georgia--
    Mr. Bedard. That is correct.
    Mr. Scott. --in my district. Thank you, sir. It's good to 
have you here.
    Mr. Bedard, let me ask you, we are working on this 
committee, under the leadership of Chairwoman Waters, on the 
issue of privacy, and in trying to get a good bill before the 
CFPB, as well as dealing with the privacy issue with our 
fintechs. So, it is a big issue to all of us, and certainly to 
the nation.
    But there was a survey that the CFPB did, and 63 percent of 
the consumers who were contacted in that survey said they were 
abused by debt collectors. But, more remarkably, 90 percent of 
those who felt they were abused were contacted more than 3 or 4 
times in a week, over and over again.
    And so we have the CFPB's proposed regulation that makes 
changes to the frequency and manner through which debt 
collectors can communicate with consumers, including through 
social media platforms and private messaging services.
    With consumers already facing these enormous challenges in 
safeguarding their most personal and sensitive information, do 
you feel that the CFPB's proposed rule adequately protects the 
privacy of our consumers?
    Mr. Bedard. Thank you, Representative. The answer is yes.
    And the proposal goes one step further. The proposal gives 
control to consumers over those communication channels. 
Consumers have an unconditional right to opt out of those 
communications. So, to the extent consumers even feel at risk 
of privacy exposure, they can control the process and they can 
stop those communications by opting out, under the proposal.
    Mr. Scott. Could you explain, when you say that the 
consumers will have control, how will they explicitly have this 
control?
    Mr. Bedard. Thank you, Representative.
    Under the current draft of the proposal, every 
communication that is electronic between a debt collector and a 
consumer must contain a clear explanation of the consumer's 
right to opt out of electronic communications.
    And the consumer has an unconditional right to opt out of 
those communications. That is why I described that particular 
rule as giving consumers control over those communication 
methods.
    Mr. Scott. Okay. Thank you very much.
    Identity theft and fraud is another issue with which we are 
very much concerned. It has come to my attention that many 
consumers may be facing this as a result of debts that are 
incorrectly attributed to them. And, in recent years, we have 
seen an increase of cyber attacks and breaches that have 
exposed the sensitive information.
    So let me turn to you, Commissioner Chopra. Are consumers 
who have experienced identity theft at greater risk of being 
pursued for fraudulent debt?
    Mr. Chopra. Yes.
    Mr. Scott. They are. Why?
    Mr. Chopra. There have been so many data breaches, not just 
Equifax, not just Marriott, not just OPM. Our data is 
everywhere. And consumers, even if we think we have some 
control over it, it is floating all over the dark web and 
through our economy.
    Mr. Scott. Well, quickly, what protections do we have?
    Mr. Chopra. Right now, there are not affirmative data 
security and privacy protections generally writ large. The 
Federal Trade Commission has talked openly about this. And this 
is going be a problem as Big Tech continues to suck up more and 
more of our data.
    Mr. Scott. Thank you.
    Chairwoman Waters. Thank you.
    The gentleman from Missouri, Mr. Luetkemeyer, is recognized 
for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    I have, in my lifetime, been somebody who has actually made 
some of these loans and then had to collect them. It is a good 
way to make sure you understand, when you make a loan, you 
better understand you have somebody across the table who can 
actually--you don't have to go collect it from. So, it is 
interesting to hear your discussion today.
    Just out of curiosity, how many people on the witness panel 
today have been in business, where you have actually written 
the bottom of a paycheck, hired and fired, and also have sold 
your products and services and had to collect the money for 
those products and services? Anybody?
    Great. So, you understand what I am talking about here.
    It is interesting to see--I think, Ms. Jimenez or Ms. 
Auchterlonie, one of you made the comment a while ago about the 
percentage of people who pay immediately whenever they are 
contacted.
    My experience has been that most people are good people. 
When they take the money out, they are there to take the loan 
out to purchase a good or service because it is something that 
they want or need for themselves or their family, and they 
intend to pay the money back. They are not somebody whom you 
have to hit over the head, drag them in, make them sign the 
form, and then they walk out the door, and then you use that 
loan form to go beat them over the head and go drag them in or 
go collect money from them. That is not the way the process 
works, which is sometimes what is inferred here by some of the 
discussions we have had.
    These are people who come in and want to borrow money, and 
now they have a legal and just debt that they have to service. 
And most people want to pay that debt back. We talked a little 
bit today about a couple of instances, especially medical debt 
and cyber breaches, as situations where we really need to have 
the debt collectors and the lenders work with these people to 
make sure that they are not negatively impacted.
    But contact is extremely important. I can tell you from 
personal experience that whenever somebody wants to take 
advantage of you or they want to make sure they don't have to 
make that payment on time, they will find a way not to answer 
the phone, or not to answer the door. So, communication is key.
    And I would appreciate--Mr. Bedard, you have talked about 
this already quite a bit, and, Ms. Jimenez, you have talked 
about it a little bit. Would you like to elaborate on how 
important this is and where we can go with the bills that are 
being proposed here, to make sure that there is fair contact 
and that the consumer has to respond to it so that they 
understand they have a responsibility in the situation, just 
like the small business or the lender, whomever it is, has the 
responsibility to collect that debt as well?
    Ms. Auchterlonie. Yes. I do think that sometimes people 
with outstanding debts and budget constraints have a tendency 
to fall victim to the fight-or-flight syndrome and they don't 
respond to the messages and they avoid those communications, 
even when the communications can be helpful to them, which has 
a tendency to increase the calls, increase the contacts, and 
turn out some of these negative effects that we see.
    What I really like about the Bureau's rule is first, that 
it provides the opportunity for collection agencies to use 
communication means that are now more predominant in our 
society than just telephone.
    Second, they have introduced a model form that, using focus 
groups, they have been copy-testing for both readability and, 
for lack of a better word, congeniality, in order to get over 
that stiff statutory language that collection letters have 
included recently.
    And the idea is to help consumers feel more comfortable 
engaging in the debt-collection process so that they have more 
control over what happens to their outstanding accounts and can 
engage in the settlements or receive more information or ask 
questions and so on.
    Mr. Luetkemeyer. Ms. Jimenez?
    Ms. Jimenez. Yes. Thank you for the question.
    I think we are talking about this as if consumers really 
have only one debt that they are being contacted about, but 
most of the time they have between 7 and 10 debts. And the 
Bureau's rule on the contact limitations are per debt. So 
imagine just being called on each debt, sort of a reasonable 
amount of time, but that can really overwhelm someone and lead 
one to realize that, ``Well, I can't really pay all of these, 
say seven debts, and people who are contacting me. What am I 
supposed to do?''
    On the collector's side, of course they want to be the 
first person to talk to you, because you are more likely to pay 
that person. So, it is a collective action problem. And the 
issue is that the debt collector may not be reaching the right 
consumer because the information they have is incorrect.
    I think that some of the Bureau's rules are exactly right. 
I just think they did not fix the problem at its source, which 
is with creditors. And so they are fixing around the edges, 
when they really could have started at the beginning.
    Mr. Luetkemeyer. One of the things I see here is, most 
people whose debt has been referred to a debt collector, are 
people who, for the initial debt, refused to talk to the 
initial lender. At our institution, we didn't hand it over to a 
debt collector until we had exhausted all of the other things 
that we could do. So, these are folks who are kind of hardcore 
at this point, that you have to find a way to really come down 
and make sure you get some stuff collected.
    Thank you very much.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
who is also the Chair of our Subcommittee on Consumer 
Protection and Financial Institutions, is recognized for 5 
minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    I have introduced a piece of legislation, H.R. 3948, the 
Debt Collection Practices Harmonization Act. And what that 
would do is, it would extend protections of the Fair Debt 
Collection Practices Act to State and local debt, to broaden 
civil justice protections against abusive collection practices 
and prevent the Secretary of the Treasury from using private 
debt collectors to recoup debt arising out of a natural 
disaster.
    Now, what I have found is, around the nation, States and 
localities employ debt collectors to collect on debts for 
things like speeding tickets and other things, but they are not 
a part of the Fair Debt Collection Practices Act. It doesn't 
extend to them. My bill tries to close that loophole.
    So, Reverend Gould, can you think of any reason why local 
debt collectors should not have to comply with the basic 
protections provided--local government debt collectors--with 
the basic protections provided by the Fair Debt Collection 
Practices Act?
    Rev. Gould. Thank you, Congressman.
    Not at all.
    I spent more than 35 years of my life in St. Louis. There 
was a little suburb called Ferguson, that most people are now 
aware of. And after the killing of Mike Brown in 2014, the 
Department of Justice really shined the light on predatory 
practices by municipalities.
    Of the 91 municipalities that make up St. Louis County, it 
discovered that more than 60 percent of them received up to 50 
and 60 percent of their income from things like traffic tickets 
and traffic fines. People that I know personally have been sent 
to jail.
    And so, it is all connected. It is connected to predatory 
lending. And I believe that your proposed bill is a bill that 
actually helps to bridge that gap, because it is not just 
private creditors that are actually putting this burden on 
everyday citizens; it is also municipalities and other 
governments.
    Again, in the case of being in Jefferson City now, after a 
tornado, people are not exempt from any of the debt that they 
may owe, whether it is from a speeding ticket or from a 
furniture store.
    Mr. Meeks. Thank you very much.
    Professor Jimenez, I know you have written about the 
phenomenon of ``zombie debts'', which stem from an unregulated 
industry that allows for the selling and reselling of unsecured 
debts with little to no evidence of the sale record.
    Is mandating certification that a debt is for the right 
person and the right amount prior to taking a debt-collection 
action sufficient to protect consumers from abusive collection 
practices?
    Ms. Jimenez. Thank you for the question.
    I think that is a great step. I, in my written testimony, 
have six or seven other things that I think would also be 
helpful. But it starts with the seller. The seller has to be 
the one to provide that documentation, because if they don't, 
then no one else can.
    And they have to make affirmative representations that they 
are giving true information, contrary to the contracts that 
have been floating around for the past 20 years, where they 
disclaim accuracy of the information they are providing.
    I think if we start there, it would go a long way.
    Mr. Meeks. Would this type of certification regulation 
place an undue administrative expense or burden on the debt 
collectors?
    Ms. Jimenez. Obviously, it takes some effort and some cost. 
However, the question is, what is that balanced by? I think 
having documents would help collectors collect from consumers 
because they would see that, actually, okay, you do own this 
debt, because you have some evidence.
    So, I think it might balance out. It is hard to actually 
say. I do think it is worth it, given that it would protect 
consumers further than they are today.
    Mr. Meeks. Thank you.
    And let me just make another quick comment, because I know 
a number of my colleagues have already talked about the taxi 
industry in New York. And I know I only have 33 seconds. I 
would have asked the question about a man who lives in my 
district, in Jamaica, Queens. His name is Mohammed Hoque.
    He came to this country from Bangladesh, and settled in New 
York City. And in 2014, Mr. Hoque was told by a businessman 
that if he was able to get $50,000 that day, he could get a 
loan to purchase a million-dollar medallion. Long story short, 
he signed the papers, and found out that he was signing 
something in debt for $1.7 million, and couldn't pay it back, 
so as a result, he is suffering today.
    And if I had more time--but I am out of time. But those are 
the kinds of issues, the small person--he is here today--the 
small individual.
    I yield back. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you very much.
    The gentleman from Kentucky, Mr. Barr, is recognized for 5 
minutes.
    Mr. Barr. Thank you, Madam Chairwoman.
    And thank you to our witnesses today.
    I firmly believe that if someone takes out a loan or buys 
something on credit, he or she should pay back what is owed.
    And, Reverend Gould, I appreciated your reference and 
citation to scripture. We see that principle of someone who 
borrows should pay back what is owed also in scripture, in the 
Book of Psalms and other places. The Bible has a lot to say 
about financial matters, as you well know.
    But obviously, in the event that a consumer is struggling 
to repay, they should be treated with dignity, and they should 
be treated with respect during the debt-collection process.
    I do think some of the modernizations under the CFPB 
proposal help achieve that very goal. The cost of unpaid debt 
does not just disappear. Someone has to bear it. And I worry 
that it may get passed along to other consumers, and if we 
don't deal with that, the cost of credit goes up.
    Ms. Auchterlonie, I wanted to ask you about your written 
testimony in which you cite an academic study that suggests, 
``In a competitive market, losses from uncollected debts are 
passed on to other consumers in the form of higher prices and 
restricted access to credit.''
    Can you go into more detail about how modernizing debt-
collection rules could reduce the frequency of consumers 
bearing the costs for others' unpaid debts?
    Ms. Auchterlonie. Thank you.
    I think the principal point is working on finding 
comfortable, plain-language communication between the 
collection agencies who represent the creditors and the 
consumers. That is something that has been a problem recently 
because so much of debt collection now is--and the kind of 
clear, straightforward communication is stymied by fear of 
plaintiffs' litigation.
    I spoke to a debt collector a few months ago who said, ``I 
don't write my letters for the least sophisticated consumers. I 
write my letters for the most sophisticated plaintiffs' 
lawyers.''
    And that has become a real problem and is getting in the 
way of direct communication between consumers and the 
collectors, who are really just trying to care for the people 
that they are talking to and help them work out their debts.
    Mr. Barr. And, Ms. Auchterlonie, a follow-up question about 
the 80,000 or so complaints in the CFPB's reporting about 
complaints about debt collection.
    In your written testimony, you state these numbers do not 
correctly reflect the number of complaints about debt 
collection because of the way the Bureau Complaint Database is 
set up. Specifically, not all of those complaints are about the 
debt-collection industry but may capture complaints about the 
debt itself or other issues not fundamentally about the 
collection practice or the firm.
    How can the Bureau improve its Complaint Database to more 
accurately reflect the nature and substance of the consumer 
complaint?
    Ms. Auchterlonie. The Complaint Database is set up with a 
number of bullet-point questions, and consumers get to 
categorize their complaints themselves. That effort really 
isn't fixed or data-checked by any human beings, and I suggest 
that doing so probably would be very burdensome.
    I think the important point is not that the complaints 
aren't helpful and valid; it is just that you can't look at raw 
numbers and take them out of context. I think the big thing to 
note is that, of all of the complaints about debt collection, 
it actually represents less than .005 percent of all debt-
collection contacts.
    And that is not saying that some people haven't had a lot 
of bad experiences with the rogue collection agencies, 
inexperienced collection agencies, or agencies that don't have 
enough capital to invest in compliance. I am not discounting 
those experiences at all. They are there. And that is why we 
have enforcement from the FTC and the CFPB.
    But when you just look at the numbers, it is not 
necessarily an accurate picture and doom and gloom for the 
whole industry.
    Mr. Barr. Thank you for that insight.
    Mr. Bedard, I want to get to your testimony about 
regulation by enforcement. I could not agree with you more. I 
think one of the greatest frustrations with the Consumer 
Financial Protection Bureau is not giving the American people 
the rules of the road and not giving us clarity. How can you 
comply when there is no due process? How can you comply with a 
law when you don't know what the law is? And so, I think you 
are spot-on. And I think the Bureau should be commended and 
Director Kraninger should be commended for trying to provide 
clarity for regulated parties in our country.
    In your opinion, is the process that the Bureau used for 
their proposed rule a step in the right direction away from 
regulation by enforcement and toward a more regular, orderly, 
established guidance that does fulfill that promise of due 
process?
    Mr. Bedard. Thank you, Representative.
    Yes, this proposal is a step in the right direction. It 
brings clarity to an area of the law which is today not clear.
    And so, I do agree with you. Thank you for recognizing 
that. It is very important to everybody who is the subject of 
an inquiry of the CFPB.
    Mr. Barr. Thank you.
    I yield back.
    Chairwoman Waters. The gentlewoman from Ohio, Mrs. Beatty, 
who is also the Chair of our Subcommittee on Diversity and 
Inclusion, is recognized for 5 minutes.
    Mrs. Beatty. Thank you very much, Madam Chairwoman, for 
having this hearing today.
    And let me thank all of the witnesses for being here and 
for your testimony.
    I have several questions I am going try to get through. And 
for a couple of them, I am just going to ask you to go down the 
row and say ``yes,'' ``no,'' or ``I don't know'' or what you 
think.
    But let me start with the first question because in Ohio, 
the great State that I represent, debt collection is a problem.
    Ms. Kuehnhoff, according to the Consumer Financial 
Protection Bureau's Complaint Database, debt collection was the 
topic most complained about by Ohioans, with over 16,000 
complaints.
    More than one-third of these complaints directly address 
the issue of attempting to collect debt that was not owed. Is 
there anything that you know of in CFPB's debt-collection rule 
that attempts to address this issue? Because it is the number-
one issue that consumers are having in the State of Ohio.
    Ms. Kuehnhoff. Thank you for your question.
    I think that one concern about the proposed rule is, as 
originally outlined in 2016, the CFPB had a large section about 
what was called substantiation of information, making sure that 
debt collectors had the documentation to know that they were 
approaching the right person about the right amount, and that 
is not part of this proposal that is before us now with the 
proposed rule.
    Mrs. Beatty. Okay. Thank you.
    Reverend Gould, in your testimony, you stated that the 
comment letter by the Faith & Credit Roundtable submitted to 
the Consumer Bureau regarding the debt-collection rule urged 
them to ban collections on time-barred zombie debts in and out 
of court.
    Can you explain why your organization believes this is 
necessary to adequately protect our consumers?
    Rev. Gould. Yes. In most States, there were actually zombie 
laws. And so this collection of debts, like in the State of 
Missouri, that are older than 10 years, should already be 
illegal. The lack of protection around that actually opens up 
people who are already very vulnerable to sometimes having to 
pay something they don't even know about.
    I went to college in 1982. My father died when I was 17 
years old. About 5 years ago, I needed a transcript and was not 
able to get it because the school said that I owed tuition. My 
mother is now also deceased, 10 years next month. My parents 
paid for my education, so I had no way of defending that bill. 
I had never received anything from Southern Illinois 
University. And I literally could not get this transcript until 
a couple of years ago when somebody actually said it was a 
mistake.
    But after me going to get my transcript, they started to 
send me a bill every month that I had no way to defend, because 
the people who were responsible for paying it 30 years ago were 
deceased.
    Mrs. Beatty. Okay. Thank you.
    For the next question, we will start with you, Professor 
Jimenez, under Section 813 of the Fair Debt Collection 
Practices Act, if a consumer can prove a violation, they are 
eligible to be awarded $1,000 in damages over and above what 
the consumer receives for actual damages.
    Do you know if this $1,000 cap has ever been updated since 
the FDCPA made it a rule in 1978?
    Ms. Jimenez. It has not.
    Mrs. Beatty. Okay.
    So now, let me ask you this. And just answer ``yes'' or 
``no,'' down the row.
    We will start with you, Mr. Chopra. Do you believe this 
$1,000 cap sufficiently disincentivized debt collectors from 
engaging in this type of behavior we too often see? Is this 
enough?
    Mr. Chopra. Absent indexing to inflation, just like all 
civil penalties, as well in the government, it may not provide 
that deterrent effect.
    Mrs. Beatty. Okay.
    Rev. Gould. No.
    Ms. Desai. No.
    Ms. Kuehnhoff. No.
    Ms. Jimenez. No.
    Mrs. Beatty. Keep going. You are next. Yes or no?
    Ms. Auchterlonie. I am not sure. I think there is a lot of 
deterrent value--
    Mrs. Beatty. So, $1,000 is enough, in your mind?
    Ms. Auchterlonie. I think--
    Mrs. Beatty. For it to be capped at that since 1978?
    Ms. Auchterlonie. Well, plaintiffs' attorneys are asking 
for a lot more than that.
    Mrs. Beatty. It is a ``yes'' or ``no.'' We know it has been 
since 1978. We know that it has not been.
    Ms. Auchterlonie. You could index it. And plaintiffs' 
attorneys--
    Mrs. Beatty. So, that would be a ``no.'' Is that correct?
    Ms. Auchterlonie. That would be a ``no.''
    Mrs. Beatty. Okay.
    Mr. Bedard?
    Mr. Bedard. The answer is ``yes'' because of the other 
remedies that are available under the statute.
    Mrs. Beatty. But do you think there is a difference between 
actual damages and punitive damages?
    Mr. Bedard. Thank you, Representative. There is a 
difference, yes. And the statute--
    Mrs. Beatty. Okay. I'm sorry. My time is up.
    Mr. Bedard. Thank you.
    Chairwoman Waters. Thank you.
    The gentleman from Colorado, Mr. Tipton, is recognized for 
5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman.
    And I thank the panel for taking the time to be here.
    In my real life, I am a small-business guy, and we would 
wholesale out product, extend credit, and hope that it would 
get paid back, and the vast majority of the time, it did. But 
we certainly had a couple of circumstances where, after we had 
exhausted all of our remedies, placed calls for 6 months to 9 
months, trying to be able to get paid back, we had to turn to a 
credit collection agency.
    And now, in this role, I have had the opportunity to be 
able to visit with a few of those folks who run those 
businesses. And I come from a rural part of the country, and so 
it is critically important for us to be able to have access to 
credit, to make sure the bills are paid for those small 
businesses. I did want to be able to point out that a lot of 
the credit agencies that I did visit with were pretty 
compassionate people who are trying to be able to figure out a 
way to be able to help people actually right their fiscal ship, 
to maintain their credit, and be able to stand up for them.
    Ms. Auchterlonie, if lenders can't collect debt, does that 
have an impact on the ability of small-business owners and 
potential homeowners to be able to obtain credit?
    Ms. Auchterlonie. Yes, it certainly does. For highly 
regulated industries like banks, of course, there are limits 
once you have impaired debts. For small businesses, it is a 
cash-flow issue. If you don't have the cash coming in, you 
don't have the opportunity to provide services in advance. And, 
as we noted, services are the predominant form of debts in debt 
collection right now.
    Mr. Tipton. Yes, I think it is often easy to forget about 
some of the practical impacts that can often flow through. I 
cite back to my business. We used those receivables to be able 
to pay our employees, who had their debts. It is a little bit 
of a domino effect to be able to actually deal with it.
    And, Mr. Bedard, if you would maybe speak--you were talking 
about some clarity with my colleague in terms of the rule. 
Would you speak--I think it would be good for the committee to 
hear some of that clarity on the proposed rule from Director 
Kraninger.
    Mr. Bedard. Thank you.
    Under the current state of the law, it is not clear how 
consumers can utilize electronic means of communication to 
communicate with consumers, especially when those consumers 
desire those electronic communications.
    One of the many things that this proposal does, is it--and 
I will use his term--it creates the ``rules of the road'' on 
how consumers can communicate with debt collectors using 
electronic methods in ways that satisfy all of us that 
consumers will be treated fairly. That is what this proposal 
does. It does it for email. It does it for text messages. We 
have heard a little bit today about how it does that for phone 
calls.
    And that very clarity is what helps the collection process. 
It helps consumers. It helps bring access to credit and the 
cost of credit to consumers in ways that keep the system 
functioning.
    Mr. Tipton. So, it is a way to be able to collect the debt.
    Ms. Auchterlonie, maybe you would like to speak to it as 
well? What type of borrowers are harmed most when creditors 
have to constrict credit because of their inability to be able 
to collect the debt?
    Ms. Auchterlonie. The riskiest borrowers.
    Mr. Tipton. Okay. So the people who may need the credit are 
ultimately hurt the most.
    Ms. Kuehnhoff. The people who are deemed the most risky or 
the least likely to pay are the ones who first get cut off the 
credit spectrum.
    Mr. Tipton. Okay.
    Ms. Jimenez, did you have any--
    Ms. Jimenez. I think that is right.
    Although I will say that I am not sure--in fact, I don't 
think access to credit is something that ought to be defended 
at all costs, in the way that sometimes it is phrased. You 
know, ``This is going to increase the cost or cut off access.'' 
Sometimes, it is the access to credit for the riskiest 
borrowers that actually sinks them further and further into 
debt and despair. And I think it is that easy access to credit 
for people, who maybe it was even known by the creditor were 
unlikely to repay, that actually poses a larger problem.
    Mr. Tipton. Thanks.
    Ms. Auchterlonie, you came out of the CFPB. In your view, 
is the rulemaking in line with work previously done by the 
Bureau?
    Ms. Auchterlonie. Oh, this rule has been in progress for 
years.
    Mr. Tipton. Okay.
    Ms. Auchterlonie. The principal architects are career 
public servants, at this point, who have operated under several 
Directors. And, we have been talking about many of these issues 
and solving these issues for a long time.
    Mr. Tipton. Great. Thank you so much.
    I yield back.
    Chairwoman Waters. The gentleman from Florida, Mr. Lawson, 
is recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman.
    And I welcome the witnesses to the committee.
    Earlier, there was some discussion about student loan 
payments and so forth. Young Americans are increasingly 
accumulating debt for their education and student loans. They 
will be assessed collection fees in addition to the student 
loans they already owe. These fees vary, depending on who holds 
the loans, but they can be anywhere from 18 percent to 40 
percent of the outstanding balance. To put it into perspective, 
to add an extra 40 percent to a student-loan balance of $30,000 
would mean that the balance is $42,000.
    There is currently no law capping what debt collectors can 
charge for collection fees on a Federal student loan. In your 
opinion, should there be a cap? And what percentage should the 
cap be?
    Anyone can respond to that. And I will start off on this 
end here.
    Mr. Chopra. Sure. Let's just say, Federal student loans, no 
one should be defaulting, because there are statutory rights to 
income-driven repayment, that if you can't afford it, your 
payment is tied to your income, and it can be as low as zero. 
Yet our system, how it is administered by the Department of 
Education under multiple Administrations, continues to favor 
the contractors over the borrowers and the taxpayers.
    We need to completely revamp this system. And I encourage 
this committee, which has jurisdiction over a lot of these 
issues--the Treasury Department gave an exception to the 
Department of Education which is allowing this to go on, and I 
think the Treasury Secretary needs to rethink that.
    But there should not be--this essentially adds insult to 
injury, and it does not let those people get back on their feet 
to participate in the economy. It actually is a sentence for 
them that they will never be able to essentially buy a home or, 
frankly, even pass an employment verification check.
    Rev. Gould. Thank you, Congressman.
    It is not just young people. As a person who went back to 
school to get graduate degrees so that I could have a 
professional life in the ministry, I sit here with student-loan 
debt.
    There are various movements across the country from faith-
based organizations--I am thinking of the Samuel DeWitt Proctor 
Conference, with the Micah program that they have that is 
designed to actually help pastors and preachers who have that 
kind of student-loan debt.
    So, there should be some limitations.
    And we also have to talk about the wealth gap and the 
wealth gap that is disproportionate in communities of color, 
which then exacerbates the ability to pay.
    Mr. Lawson. Would anyone else care to respond?
    Ms. Jimenez. Thank you for the question.
    I think, like Commissioner Chopra said, we need to overhaul 
the system. Borrowers need to be able to have rights against 
their servicers so that their servicers have to do things like 
timely giving them a loan payment history, and if not, then 
they ought to have a clear private right of action against 
servicers for violations of those rights.
    And we need to investigate why more white borrowers than 
Black borrowers are in income-driven repayment programs, which 
are the repayment programs that Commissioner Chopra talked 
about that would allow them to be current even if they cannot 
repay.
    Mr. Lawson. Okay. Thank you.
    I want to try to get in one other question. Ms. Jimenez, 
despite the increased number of payment options available to 
Federal student-loan borrowers, one in every four borrowers is 
delinquent and in default on the Federal debt.
    I introduced a bill that changes the repayment period on 
Stafford loans from 6 months to 1 year after graduation. Would 
you support this change? If not, I would like to hear your 
feedback on why not?
    I have a large number of students in my district, over 
100,000. And they, a lot of times, don't have jobs, and they 
have to start paying at 6 months instead of trying to get a 
chance to get established.
    My time has run out, but I just want a quick comment from 
you.
    Ms. Jimenez. I think if we could get--it is not a bad idea. 
I think, ultimately, if we could get those borrowers in income-
driven repayment from the beginning, it wouldn't matter, it 
would be even more helpful. Because even if they couldn't get a 
job after 1 year, they would be in zero-dollar payments for 
however long.
    So there are many, many ways that we can do that. It is too 
complicated to explain how, but--
    Mr. Lawson. Okay. Thank you.
    And I yield back.
    Chairwoman Waters. Thank you.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes.
    Mr. Williams. Thank you, Madam Chairwoman.
    I, too, am a small-business owner. I sell and I finance 
automobiles. I have always tried to collect debts on my own. 
About 50 years ago, I went to a place called Whiskey Flats, 
Texas, to a trailer park to collect a payment on a used car I 
had sold. When I knocked on the individual's trailer, he told 
me I should leave immediately, and from the sound of his voice, 
I did just that. As I was walking away from the property, I 
noticed he had a ``George McGovern for President'' bumper 
sticker on his truck that I had sold him. So I figured that he 
had a little bad judgment, just for that reason. Now, this 
incident made me realize that sometimes I may need to turn to 
the pros to get the money that was rightfully owed to my 
business.
    For small-business owners like myself, high accounts 
receivable balances directly reduce cash flows--it is just 
simple math--that are necessary to keep the doors open. In an 
ideal world, everyone would be financially accountable and 
would pay their debts like you are supposed to. But in a time 
where we are debating proposals to forgive student-loan debt 
and to remove negative information from credit reports, we 
cannot be demonizing this profession that holds people 
responsible for their financial decisions. As a business 
becomes more reliant on credit, we need to ensure that we have 
practical, modern ways to collect this debt.
    So, Ms. Auchterlonie, while the new CFPB rule is a 
significant improvement from the initial iteration, it still 
misses the mark in some significant areas. Can you give us your 
opinion on how this proposed rule can be further improved upon?
    Ms. Auchterlonie. Thank you, sir.
    One of the major criticisms I have about the rule is that 
it requires debt-collection agencies to provide itemized 
validation of debt, which requires essentially up to nine new 
data fields, when they send their letters with debt information 
to consumers. And for anyone who has ever had to reprogram 
systems that involve significant data fields, it is a big 
expense for the industry. And it is even a bigger expense for 
the creditors who send their collections accounts to debt-
collection agencies.
    Our concern, principally, is that the small businesses who 
may right now only send 25 or 30 collection accounts per year 
won't have the ability to provide this information to the debt-
collection professionals, and, thus, they won't be able to hire 
a professional in order to have the debt collected in that 
legal, FDCPA-covered manner.
    Mr. Williams. Okay. Thank you.
    We have heard about the important function that debt 
collectors serve in our economy, and, as any industry, there 
are unfortunately some bad actors that need to be held 
accountable when they break the law.
    However, we have also heard about the confusing and 
outdated nature of the regulations that have penalized 
legitimate businesses who think they are doing the right thing 
and they are hit with frivolous lawsuits.
    If this industry had clear guidance on what is expected 
from the regulators, bad actors would be driven out of the 
marketplace through competition. That is the beauty of 
capitalism.
    So, Commissioner Chopra, before I continue with my 
question, are you a capitalist or are you a socialist?
    Mr. Chopra. I believe in markets, and I am a capitalist.
    Mr. Williams. Thank you very much. So, with that, what 
effect do you think debt collectors have on the cost of credit?
    Mr. Chopra. This is actually a market in which normal 
market forces don't work. Consumers don't get to choose who 
their debt collector is, so they don't actually have market 
power to take their business elsewhere. And often, many small 
businesses actually are outraged when they hear how someone is 
treating their customers.
    So, this is actually an example where regulation helps both 
legitimate businesses and consumers, because you cannot vote 
with your feet.
    When we think about how we can make the debt-collection 
industry work, we have to think about what is right for 
consumers and the honest businesses. Because, right now--and I 
have seen a lot of debt collectors--they are at a competitive 
disadvantage because of abuses in the market. So the market 
simply cannot work.
    We should be thinking about honest businesses, about 
consumers, and a regulation that actually makes sure it is 
working for them rather than just for the ones who sidestep the 
law and face no real accountability for it. That is how we will 
make a market work here.
    Mr. Williams. All right. Thank you.
    Mr. Bedard, in your testimony, you mentioned that the CFPB 
has exacerbated the problems with the debt-collection industry 
through unfair, agenda-driven enforcement actions.
    I have spoken to many businesses around Texas who have been 
bullied into settlements by this rogue agency so they will not 
have to spend years defending these costly, politically driven 
allegations.
    Can you elaborate on the statement from your testimony and 
give us an example of where the CFPB has tried to regulate by 
enforcement?
    Mr. Bedard. Yes. Thank you, Representative.
    The concerns of your constituents are legitimate. There are 
areas in the law in which there is no clarity about what the 
proper behavior is.
    And when I talk about regulation by enforcement, what we 
mean is that, instead of creating a rule first and then 
expecting everybody to follow the rule, what has happened and 
what we have seen in the past is enforcement actions and 
investigations, which, you are correct, take years--
    Chairwoman Waters. The gentlewoman from Michigan, Ms. 
Tlaib, is recognized for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman.
    And thank you all so much for being here and for 
testifying.
    One of the things that I, as a Member of Congress, in the 
first 8 months, just even talking to my residents--we just 
passed a bill out of this committee, of which I am very proud, 
and with the wonderful support of our Madam Chairwoman here, 
H.R. 3622, the Restoring Unfairly Impaired Credit and 
Protecting Consumers Act, which reduces the debt on someone's 
credit report from 7 years to 4 years, which is a better 
indicator anyway, and which would be transformative for so many 
of our folks that we represent and advocate for.
    But our residents are being scammed. And that is the part 
that I feel like gets missing about collection, is the ones who 
were unfairly targeted with high interest rates, predatory 
lending--unfairly, because they didn't know what their rights 
were before they signed. I feel like there needs to be a better 
balance in this conversation, in this debate, in this 
committee. And I feel like that gets lost.
    Because I know my residents; they are not buying these 
expensive cars or these luxury items. It is their lives. They 
are trying to live. And including those who are starting a 
business, because it is a dream, it is a way to provide for 
their children and provide a better future for their family.
    So, I want to thank you again for your testimony.
    In my district, the 13th District of Michigan, I was really 
taken aback by a story of a gentleman who served our country. 
After graduating from college, he joined the military and 
served our country for a number of years. And upon returning, 
he faced harassment, literally harassment, from debt collectors 
that many Americans know all too very well--countless calls, 
threats. And even more shocking, he was taken to court to 
settle his student loan debt and so forth. Just dragged into 
court without any kind of agreements or discussions beforehand.
    And so, Commissioner Chopra, I see CFPB as kind of a line 
to draw that balance, to figure out who are the ones getting 
abused and who are really scammed into predatory lending, 
probably what is illegal.
    Not all of us can afford to go to court, folks. We can't 
afford to find a lawyer. Do you know how distressing that is? 
And I know my colleague from Massachusetts is going to talk 
about the trauma of that, because it is a trauma. It is 
something that for my residents, it paralyzes their lives 
immediately.
    I want to talk to you, Commissioner. What do you think the 
CFPB can do better right now in regulating debt-collection 
practices around not only student loans but even around the 
other kind of predatory lending? Where is that balance? Remind 
us why we even created the CFPB in the first place?
    Mr. Chopra. I agree with you. The conversation is not about 
an auto mechanic who couldn't get a bill paid. The reality is 
that people who owe debt, many of them simply cannot pay or 
they don't even owe it in the first place.
    And that is what is missing about what the original concept 
of a better debt-collection rule is about. Not just third-party 
debt collectors; what about the first parties? And what about 
substantiating the fact that the debt was even owed in the 
first place?
    I have seen it firsthand. Many of these collectors don't 
even have basic information to show that it is actually owed. 
And you know what many Americans do? They just pay it, because 
they are scared about what will happen to their credit, to 
their employment, and other things.
    Ms. Tlaib. Yes, it is bullying. And they are really 
dismayed because they are like, ``Well, this is how much I 
borrowed. Why is it triple the amount?'' You know? They just 
want somebody to advocate and believe them.
    Third-party debt collectors are huge corporations that 
profit off of intimidation, harassment, and threats to 
borrowers, even though the 1977 Fair Debt Collection Practices 
Act prohibits this type of abuse.
    Ms. Kuehnhoff, what are some of the predatory practices of 
loan servicers that you have seen personally? If you can talk 
specifically about a story that is more shocking that you 
have--that people need to realize what the human impact of 
doing nothing--and this sense that this is politicized, and by 
having the CFPB as the front line of protecting our residents.
    Can you talk about a specific case that you think would 
maybe shed some light on why we need this kind of advocacy 
within the Federal Government?
    Ms. Kuehnhoff. Sure. Thank you very much for that question, 
and I think it is important to keep these consumer stories at 
the forefront of our thinking about this issue.
    I am going to really briefly try to recount the story of 
Ms. H., who had a payday loan that was 7 years outside of the 
statute of limitations, and was getting harassing calls from 
debt collectors for months, multiple times a day, back-to-back 
calls. And even though she was suffering from illness, she 
continued to be harassed until she finally made an agreement 
for a payment, which brought that whole debt back within the 
statute of limitations and subjected her to liability.
    And I am going to stop there because my time is up, but 
thank you for your question.
    Ms. Tlaib. Yes. Madam Chairwoman always keeps us on time.
    Thank you so much. I yield back.
    Chairwoman Waters. Thank you very much.
    The gentleman from Georgia, Mr. Loudermilk, is recognized 
for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman.
    And I want to thank the panel for being here today.
    This is a very important subject, from someone who has been 
on both sides of the debt-collection issue. When I was in the 
military, I experienced some debt-collection calls. Some were 
just because I didn't get paid very much. And then, there were 
those where it wasn't me, and they are calling. Ninety percent 
of the time, though, I said, ``It is not me. You have the wrong 
person.'' Eventually, they stopped. Then, there are those that 
are continually harassing. We know that that happens.
    On the other side of the coin, as a small-business owner 
with a struggling business, just getting started, I got a 
business opportunity with a doctor. We went in and provided him 
with computer systems, the network, we got his office up and 
running, and he didn't pay. I didn't want to go to a debt 
collector, because it is a close-knit community, and we were 
doing work with other doctors, and you don't want to get a 
reputation that you are turning it over to a debt collector, et 
cetera, et cetera.
    I changed my mind when I found that the doctor was 
expanding his office and bought a new car. I went to a debt 
collector, and they were able to recover the debt. I was the 
one hurting because I have a small business. I am trying to 
keep people employed, right?
    There are bad players out there. Debt collectors do provide 
a service. So, what we are trying to do is find a balance, 
strike a balance. It isn't always that they are the bad guy out 
there. Somebody borrowed money, somebody owes money, and they 
are not paying for whatever reason. So, we have to find the 
right balance.
    Ms. Auchterlonie, can you explain what the consequences for 
lenders and borrowers would be if they did not have appropriate 
debt-collection practices in place? If we didn't have any type 
of debt-collection practice, would that not have a negative 
effect on every borrower, especially those in a lower-income 
level?
    Ms. Auchterlonie. Oh, certainly. I am having images of the 
movie ``Deadwood,'' actually. No, the FDCPA has put us 
tremendously far ahead and has been really helpful in the field 
of regulating debt collection for a very long time. I am 
looking forward to actual thoughtful regulation that brings it 
up to date.
    Mr. Loudermilk. Okay. Because my experience is, when the 
doctor doesn't pay my office, I have to make up that 
difference. So I can't pay my employees as much, or I have to 
charge more to other customers. And we see this.
    There is a difference between the first party, the second 
party, and the third party in debt collection. A lot of times, 
it is that contractor that just gets a bulk of especially 
medical expenses. I have experienced that recently from 
hospital bills from an auto accident, that we didn't even 
receive the bill, and all of a sudden we are getting the calls. 
Right? So we know that there are some issues out there.
    But aren't the first-party debt collectors already subject 
to a series of laws governing their debt-collection practices? 
I am talking about the first party.
    Ms. Auchterlonie. Third-party debt collectors have a much 
stronger regulatory scheme under the FDCPA. The first-party 
creditors would be subject to what we call the UDAP (unfair or 
deceptive acts or practices) which have been interpreted very 
similarly, in many respects, to the FDCPA.
    Mr. Loudermilk. Okay.
    Ms. Auchterlonie. The big difference is that first-party 
collectors don't need to give them any Miranda notice, they 
don't have to do the debt validation and some of the more 
formulaic aspects of the FDCPA.
    Mr. Loudermilk. Is there a reason that there is a different 
set of regulations for first-party and third-party collectors?
    Ms. Auchterlonie. Many times--and I see this a lot--a 
first-party creditor wants to maintain the relationship.
    Mr. Loudermilk. Right.
    Ms. Auchterlonie. And, also, if you were subject to the 
FDCPA and you were making a call that had to say, ``This call 
is from a debt collector; anything you say can and will be 
used,'' that wouldn't necessarily be accurate. That mandatory 
language itself might be deceptive.
    So having those really prescriptive terms that are in the 
FDCPA aren't always appropriate for first-party creditors.
    Mr. Loudermilk. In the scenario I gave with my business, I 
would be the first party. I am trying to be conscientious, keep 
that relationship going too. Hopefully, the guy just forgot.
    Ms. Auchterlonie. Right.
    Mr. Loudermilk. Maybe he is still trying to get things 
established, would make some payments a long time. So, that 
makes sense.
    Mr. Bedard, is it important for Congress not to establish 
new policies for first-party debt collectors that conflict with 
those already-existing requirements?
    Mr. Bedard. Yes, it is important that those rules do not 
conflict. I think there is universal agreement that both 
creditors and debt collectors, together, have a regulatory 
scheme that makes the process from origination to collection as 
smooth, as efficient, and as kind as possible to consumers. And 
the avoidance of conflict between creditor rules and debt 
collector rules, I think, is a necessary ingredient to achieve 
that.
    Mr. Loudermilk. Okay.
    I see my time has expired. I yield back.
    Thank you all.
    Chairwoman Waters. Thank you.
    The gentlewoman from Massachusetts, Ms. Pressley, is 
recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman, for continuing 
to center those issues of concern to the American people on 
this committee.
    A ringing phone is a childhood trauma trigger for me. It is 
one of the reasons I don't have a landline today. Raised by a 
single parent who was rarely home, I spent a great deal of time 
alone at an early age, so early that my mother feared, if 
authorities knew, they would take me away from her. But as a 
single mom, unable to afford childcare, she had no other 
choice. She was gone a lot, working. And we only had each other 
to rely upon. She was gone, working, to pay the rent on time, 
to keep groceries and food on the table, to pay for 
transportation, and, because the school in our community was 
underperforming, to send me to a tuition-based school.
    My mother was a beautiful, bright, prideful woman with a 
strong work ethic who took pride in paying her bills, and 
paying them on time. So you can imagine how distressing it was 
and the shame she felt when she could no longer do that.
    There were many disruptive life events, but there are two 
that immediately come to mind. The first is a major surgery she 
had, and the second is the death of her mother, who died 
suddenly and without life insurance.
    Consequently, my mother worked and worked, and yet we still 
owed everybody. We owed the utility company. We owed the 
landlord. We owed the bank for our car. She owed the school 
tuition. But the ends simply wouldn't meet, and, consequently, 
we were faced with eviction notices and the repossession of our 
car.
    Like many children growing up under similar circumstances 
and stressors, I adulted early. I managed heavy-handed knocks 
at our apartment door, and I managed debt-collector calls with 
great skill and sometimes, out of childhood desperation, 
emotional pleading. I also managed what my mother, without 
meaning to, projected onto me and what I felt: feelings of 
fear, vulnerability, judgment, and shame.
    My mother often said, ``Ayanna, don't worry. God will 
provide.'' And provide He did, through her labor, multiple 
jobs, and late nights spent away from her only child and baby 
girl. It is my belief and observation that my mother, in fact, 
worked her way to a premature death.
    Our story is the story of millions of families. And that is 
why I am introducing H.R. 4664, the Monitoring and Curbing 
Abusive Debt Collection Practices Act, legislation that would 
require the Director of the CFPB to issue quarterly reports to 
Congress analyzing consumer complaints about abusive debt-
collection practices.
    We know that debt collectors are quick to employ aggressive 
tactics. That is why my bill would prohibit the Director from 
issuing rules allowing collectors to bombard consumers with 
unlimited text messages and emails--psychological harassment by 
any other name.
    Research has shown that some student-loan borrowers are 
finding themselves physically ill as a result of the stress and 
anxiety associated with their loans, and we have seen an 
increase in suicide attributed to debt despair.
    But there is not only the psychological toll and impact; it 
is threatening people's very professional livelihoods. In some 
States, including the Commonwealth of Massachusetts, there are 
laws on the books allowing a State to suspend and even revoke a 
professional license due to a defaulted student loan.
    Commissioner Chopra, can you speak more to this practice, 
please?
    Mr. Chopra. Yes. In 1990, the Department of Education 
started pushing States to pass these laws, because the 
assumption was that people could pay. And now we are seeing 
teachers, nurses, and so many other professions losing out on 
being able to actually earn an income to pay their debt.
    This is a completely antiquated and backwards way of 
thinking that assumes that debtors are villains and, instead, 
wants to punish them, rather than actually helping them get on 
their feet.
    Ms. Pressley. Thank you, Commissioner.
    Now, not only are these debts literally forcing people out 
of jobs and making you ineligible to work in your field, the 
collections industry can wield the criminal justice system to 
go after consumers as well. Representative Tlaib was speaking 
to some of this.
    So, Professor Jimenez, there seems to be an increase in the 
industry's reliance on small claims court, particularly in 
States that do not have strong consumer protections. Yes or no, 
are criminal charges a possibility in cases of debt 
nonrepayment?
    Ms. Jimenez. A form of--jail is possible.
    Ms. Pressley. How can a charge like contempt of court hurt 
a consumer's ability to secure future jobs or financing?
    Ms. Jimenez. They can actually be sitting in court, like 
Mr. Okoroafor was, until somebody bails them out by paying 
whatever the debt is, regardless of whether they had defenses 
against that debt. And it can be in a criminal record.
    Ms. Pressley. Ms. Kuehnhoff, in more recent years, the U.S. 
Treasury has been seizing the--okay.
    All right. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman.
    And I would like to thank all of our witnesses here today.
    This is an extremely important issue, and I think, as my 
colleague from Massachusetts just described, this is a matter 
of life and death. And it has been a matter of life and death 
for our communities back home in New York, for my constituents 
in particular, especially when it comes to a very specific 
issue that Ms. Bhairavi Desai articulated earlier in her 
opening statement.
    And I want to thank you for drawing attention to this issue 
and for being here representing New York taxi workers.
    I sent a letter, along with several of my colleagues from 
New York, on August 1st, expressing my concern over the role of 
regulators supervising banks and credit unions involved in 
predatory lending and collection practices that has led many 
taxi drivers, including some of my constituents, to suicide. 
This, I think, is a matter of financial malpractice and 
predatory behavior that I think, in many ways, should be a 
national scandal. It is literally killing people. To date, we 
have only received two responses from those agencies.
    Ms. Desai, in order for a person to own a cab, a taxi cab, 
in New York City, you need to own a taxi medallion, correct?
    Ms. Desai. In order to operate the car for service, you 
need a medallion.
    Ms. Ocasio-Cortez. Correct. And these medallions are sold 
on the open market through auctions where New York City usually 
sets the opening bid, right?
    Ms. Desai. That is right.
    Ms. Ocasio-Cortez. At the last auction in 2014, the City of 
New York set the opening bid at $800,000 for a taxi driver, 
correct?
    Ms. Desai. That is right.
    Ms. Ocasio-Cortez. And the price in 2002 was $200,000. It 
skyrocketed to $800,000 just 12 years later. How did that 
happen?
    Ms. Desai. There was really a concerted effort between the 
lenders and the middlemen, called taxi brokers, and several 
government agencies. The City of New York, from 2004 to 2014, 
made $850 million from these auctions. I remember after 9/11, 
when the economy started to crash, the Bloomberg 
administration, at the time, had said they would auction off 
medallions in order to balance that budget.
    Ms. Ocasio-Cortez. Thank you, Ms. Desai.
    I think one of the things that is so important for people 
to realize is that these are everyday people, most of them 
immigrants, in New York City, trying to start their lives and 
live up to our country's promise.
    And loans of almost a million dollars were given to drivers 
who are only making, sometimes, $30,000 a year. Is that 
correct?
    Ms. Desai. That is correct.
    Ms. Ocasio-Cortez. I have three documents, three reports, 
from The New York Times on this scandal, and I would like to 
seek unanimous consent to submit them for the record.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Ocasio-Cortez. I would also like to submit for the 
record a document that was provided to us by one of our 
drivers, Mr. Mohammed Hoque.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Ocasio-Cortez. It shows his actual statement of a 
million-dollar loan given to him. And his tax records show that 
in 2012, he was only making $22,392 a year; and in 2013, 
$23,269 a year.
    He was given a million-dollar loan while making $20,000 a 
year, and we are supposed to act as though this is his fault? 
This is criminal behavior.
    And it has not just happened to Mr. Hoque; it has happened 
to immigrant taxi drivers all over the City of New York. 
Regulatory agencies knew. The City knew. And these suicides are 
not just an indirect side effect, they are a direct consequence 
of the neglect of a vulnerable community in New York City.
    In fact, we have accounts right here reported by The New 
York Times. One of the drivers drove in front of City Hall 
himself, wrote a note on Facebook saying he could not continue 
to live, and killed himself right in front of City Hall. And we 
are ignoring this crisis.
    These taxi drivers need a bailout, because this is not just 
about predatory collection practices, as I was discussing with 
my colleague here. This is manufactured financial indentured 
servitude. And it is wrong. We need to bail out these drivers.
    And I would like to invite my colleagues here on the 
Federal level and our partners on the city level to make sure 
they get the justice they deserve.
    Thank you very much.
    Chairwoman Waters. The gentlewoman from California, Ms. 
Porter, is recognized for 5 minutes.
    Ms. Porter. Ms. Auchterlonie, I want to read you a few 
statements about debt-collection rules and see if you would 
agree that they are consistent with your testimony.
    ``I believe that everyone--this is a quote--in this room 
shares the same ultimate goal: to end abusive debt collection 
in the market. Debt-collection abuse is a stain on an industry 
that has served consumers extraordinarily well.''
    Ms. Auchterlonie. Agreed.
    Ms. Porter. ``Debt-collection laws create a tremendous 
compliance burden for companies. In the best-case scenario, 
these burdens increase the cost of lending for consumers. In 
the worst case, they chase legitimate debt collectors out of 
the jurisdiction altogether.''
    Ms. Auchterlonie. I don't necessarily agree with that.
    Ms. Porter. Why not?
    Ms. Auchterlonie. I think the debt-collection rules are 
essential in order to even out the marketplace.
    Ms. Porter. You do not think they create a compliance 
burden?
    Ms. Auchterlonie. Certain compliance is necessary.
    Ms. Porter. Okay. Thank you.
    ``While unintended, the proliferation of diverse laws has 
created enormous compliance burdens for debt collectors, the 
costs of which are necessarily passed on to borrowers, 
increasing the cost of credit.''
    Ms. Auchterlonie. I think that yes, it can happen.
    Ms. Porter. Thank you.
    What if I told you that the quotes I just gave were about 
mortgage lending, and I substituted the words, ``debt 
collection,'' for ``mortgage lending,'' and that the quotes I 
just read to you were from testimony provided by mortgage 
bankers in 2005, a few years before the crisis. They sat where 
you are sitting, before this very committee, convincing 
lawmakers to block legislation to rein in predatory consumer 
practices.
    At the same time those mortgage bankers were here trying to 
get legislators off their scent, I was also testifying before 
this committee, trying to get the mortgage abuses and the robo-
signings stopped.
    Your firm represented a lot of those mortgage lenders, and 
you are here today on behalf of the debt-collection industry. 
Why should this committee find your arguments and positions on 
abusive debt collection credible when you are just recycling 
the same, tired arguments that we hear from industry over and 
over again?
    And I illustrate--
    Mr. Zeldin. Madam Chairwoman, I raise a point of order.
    Ms. Porter. Please pause my time.
    Chairwoman Waters. A point of order has been raised.
    Please do not raise your board. We have talked about this 
before.
    Thank you. Please continue with your testimony. 
    Ms. Auchterlonie. So one of the things--
    Ms. Porter. Excuse me.
    Ms. Auchterlonie. --that we talked about--
    Ms. Porter. Excuse me.
    Ms. Auchterlonie. --is that--
    Ms. Porter. Reclaiming my time.
    Ms. Auchterlonie. Oh, sure.
    Ms. Porter. Parliamentary inquiry. What is the point of 
order being made?
    Mr. Zeldin. Madam Chairwoman, Clause 6 of House Rule XVII 
prohibits the use of dynamic displays as exhibits. Members are 
authorized for 5 minutes in hearings to hear from and question 
witnesses. If the committee allows whiteboards and other 
dynamic displays, Members can more easily manipulate the data 
or information in an exhibit to obtain a response that all but 
eliminates the witness' objective point of view and replaces it 
with their own. These displays are prohibited on the House 
Floor and should not be allowed in committee.
    Ms. Porter. Madam Chairwoman, may I respond?
    Chairwoman Waters. The gentleman is correct. Dynamic 
displays are not permitted.
    Ms. Porter. Madam Chairwoman, that is a rule that pertains 
to the House Floor, not a rule that pertains to this committee. 
Are we adding additional committee rules at this time?
    Chairwoman Waters. The House rules do apply.
    Will the gentlelady continue with her--
    Ms. Porter. Yes, Madam Chairwoman.
    I realize it is difficult for you to see, but if you could 
direct your attention over to that ``financial services bingo'' 
board, these are all arguments that I have heard over and over 
and over again in my career: frivolous lawsuits; balance costs 
and benefits; these are just inconsequential violations; we are 
going to reduce the supply of credit; there are going to be 
unintended consequences if we regulate.
    And these are all terms that came out of your very 
testimony before this committee today.
    You said that the debt-collection industry was--in your 
testimony, that it is a caring profession.
    Ms. Auchterlonie. Yes.
    Ms. Porter. A caring profession.
    [Video shown.]
    Mr. Zeldin. Point of order, Madam Chairwoman. Point of 
order.
    Chairwoman Waters. The gentleman raises a point of order. 
What is your point of order?
    Mr. Zeldin. What was just getting played?
    Chairwoman Waters. I have no idea. The Chair was not 
advised of any attempt to present in any shape, form, or 
fashion statements, testimony, or questions by something other 
than her voice.
    Will the gentlelady please refrain from disrupting this 
committee? Please continue with--
    Ms. Porter. Madam Chairwoman, I would like to lodge my own 
point of order.
    I am not required to provide my testimony in advance to 
this committee. I am making an oral statement. Others have used 
the same technique in other committees.
    Chairwoman Waters. The gentlelady is out of order.
    Would you please continue with your testimony?
    Ms. Porter. If you are not familiar, that was a clip from 
the movie, ``Maxed Out,'' in which the debt collector talks 
about walking consumers out to the end of the plank, just like 
a pirate.
    I had another clip that I am unable to play because of the 
chairwoman's objection, that describes the way in which debt 
collectors identify neighbors and family members and seek them 
out, and that that is the most effective technique they have to 
collect debts, which is legal under the current law, because it 
humiliates and shames debtors into paying.
    Ms. Auchterlonie, does that sound caring to you?
    Ms. Auchterlonie. I was--
    Mr. Zeldin. Madam Chairwoman, point of order.
    That question started with an audio that I did not--we 
can't assume that all of the witnesses understood what the 
audio said at the beginning of that question. We can't assume 
that all members of the committee understood what the audio 
said at the beginning of that question. It was a faint audio. I 
didn't hear the words, myself.
    Point of order.
    Chairwoman Waters. The gentleman has raised a point of 
order relative to the origin of the question.
    The gentlelady has 1 minute and 14 seconds left. I would 
ask the gentleman to disregard--or to not put forward his point 
of order, and allow the gentlelady to finish with the question. 
I think that would save us time and energy.
    Ms. Auchterlonie. I would take issue with the fact that 
those types of tactics are legal. They are certainly illegal. 
And I think everyone on this panel agrees that illegal conduct 
and that, sort of, cowboy debt collection needs to stop and 
needs to be vigorously enforced. I have done it myself, 
personally, when I was at the CFPB, and I continue to believe 
that that is the CFPB's role.
    Ms. Porter. Reclaiming my time for one second, Ms. 
Auchterlonie, are you suggesting that it is unlawful under 
current law to contact someone's neighbors or families, for a 
debt collector to do that?
    Ms. Auchterlonie. It is only lawful under specific 
circumstances of acquiring location, and it is very specific 
about what they can say. It is not to be for harassment.
    Ms. Porter. Okay. So you don't believe that practice, as 
currently permitted by law, is abusive?
    Ms. Auchterlonie. The FDCPA specifically says how you are 
supposed to do it, and if agencies are following those 
instructions, then it is not abusive.
    Ms. Porter. Thank you.
    With that, I yield back.
    Chairwoman Waters. The gentlewoman from North Carolina, Ms. 
Adams, is recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman. Thank you for 
convening this hearing.
    And to all of our witnesses, thank you very much for being 
here, and for your testimony.
    Reverend Dr. Gould, can you talk about how communities of 
color are disproportionately affected by excessive 
communication and harassment from debt collectors?
    Rev. Gould. Absolutely. Serving a Historically Black Church 
in an African-American community, and often being a person who 
is contacted to help people, but it is not just my own 
experiences. There is credible research.
    In my opening, I talked about the National Consumer Law 
Center that reports in the State of Missouri, a State that has 
83 percent white residents, 65 percent of the 31 percent of 
people in debt collection are people of color.
    And so part of the issue is this wealth gap that we have, 
and communities of colors by and large are victim to 
divestment. People are not investing in our communities. They 
are continuing to extract wealth and bar people from actually 
being able to have access to the same earnings that their white 
counterparts have.
    Ms. Adams. Okay. So what initiatives have churches and 
community organizations undertaken that can help break these 
debt trap cycles for the most vulnerable communities that you 
make reference to?
    Rev. Gould. There is an organization, RIP (Rest in Peace), 
in New York. Since 2018, they have had 18 churches that have 
actually eliminated $34.4 million of debt from people who live 
at or below the poverty level. I mentioned the Samuel DeWitt 
Proctor Conference, which is an organization that is a social 
justice conference of the African-American churches, and it is 
also positioning itself to be able to buy debt to alleviate the 
burden.
    In my own State, a beloved sister and colleague, Reverend 
Traci Blackmon, is currently in a project with other United 
Churches of Christ to actually eliminate debt and buy the debt 
in her ZIP Code of people who live below the poverty level.
    So faith communities are certainly doing our part, but it 
is also not our part to eliminate bad policies that actually 
burden consumers.
    Ms. Adams. Yes, ma'am. Thank you very much.
    The leading cause of bankruptcy in the U.S. isn't credit 
card debt, motor vehicle loans, or student loans; it is unpaid 
medical bills.
    So, Ms. Kuehnhoff, which financial assistance policies do 
you recommend that Congress create, modify, or enforce to 
assisty the 43 million Americans who are struggling under 
medical debt?
    Ms. Kuehnhoff. Thank you for this important question, 
Representative.
    I think that, first, I am primarily speaking from the debt 
collection side, but I do want to say that obviously solutions 
to expanding and improving health insurance are critical for 
addressing this problem, but I am going to give some solutions 
on the debt side of things, once medical debts exist: dealing 
with surprise medical bills in a way that holds consumers 
harmless for these disputes between insurers and providers; 
improving the financial assistance policies that are already 
provided for under the ACA (Affordable Care Act); there is a 
provision that requires nonprofit hospitals to provide 
financial assistance policies, but that provision doesn't give 
any specifics.
    There is no minimum amount of financial assistance, no 
guidance as to who should be eligible. There are no 
requirements on for-profit hospitals. There are no private 
remedies under those provisions to enforce these rules. And 
there is no statement that underinsured people should be 
covered.
    So, all of these improvements.
    Ms. Adams. Thank you very much.
    I want to ask a question about the student debt.
    Commissioner Chopra, how can existing law protect students 
of color from being disproportionately targeted by debt 
collection lawsuits? We have 20 seconds.
    Mr. Chopra. There are too many lawsuits that are being 
filed by the Department of Justice against defaulted student 
loan borrowers, and data shows that overwhelmingly is targeting 
those who live in ZIP Codes that are disproportionately 
minority. And I think we need to fix that.
    Ms. Adams. Great. Thank you very much.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. The gentleman from Tennessee, Mr. Rose, 
is recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters.
    I think it is important that, when possible, people fulfill 
their financial obligations, because when that doesn't happen, 
those costs are borne by someone else, by a small business in a 
local community or by a taxpayer who did meet his or her own 
credit obligations.
    That said, as many of my colleagues have rightfully pointed 
out today, our regulations are outdated and no longer 
adequately serve those who need our help.
    Technology exists today that did not exist in 1977 or 2006 
or 2010. And in 10 years, there will be technology, no doubt, 
that will exist that does not exist today.
    So while I believe some work remains in the CFPB's proposed 
rule, the longer we wait to act, the worse the problem will 
get.
    I support the CFPB's efforts, but I do believe some 
important concerns have been raised about flaws with this rule, 
concerns I hope will be addressed.
    Last week, the Small Business Administration's Office of 
Advocacy submitted its comments on the proposed rulemaking, and 
one of the concerns mentioned was with the validation notice. 
The office is concerned that, given the amount of medical debts 
collected, itemization could not only be difficult and 
unworkable, but it could also violate HIPAA (the Health 
Insurance Portability and Accountability Act).
    Mr. Bedard and Ms. Auchterlonie, as attorneys who have 
operated in this space for some time, might this be a concern 
the CFPB would have to address to move forward?
    Ms. Auchterlonie, if you would go first?
    Ms. Auchterlonie. Yes, we believe so. And in the comments 
that I helped write, directed towards the Bureau on their rule, 
we spent quite a bit of time educating them on the HIPAA 
applications, specifically because medical debt that is in 
collection is estimated to be between 47 and 58 percent of the 
outstanding third-party debts in the country. So, there are 
certainly HIPAA issues.
    Mr. Rose. Mr. Bedard?
    Mr. Bedard. I agree with those statements and with the 
comments that were provided.
    Mr. Rose. Are there ways to address wanting a more detailed 
itemized validation notice without having to amend HIPAA-
permissive disclosures to include the information requested by 
the CFPB?
    Ms. Auchterlonie. One of our suggestions was that 
collectors have a little bit more flexibility to provide the 
names of creditors. And this would apply not just in the 
medical categories, but also financial services and other 
categories, because the proliferation of debt purchasing means 
that the institution that owns your account may be this third-
party debt buyer that, when you get the letter, you don't 
recognize their name.
    But it would be really helpful for consumers in 
understanding that they are actually being asked to pay for a 
debt that was originated by some bank or some dentist office or 
some creditor that they actually recognize.
    So we ask for the flexibility for debt collection agencies 
to provide more of a description of the chain of title of the 
debt, which I think would also reduce a lot of the complaints 
that, ``this debt is not mine,'' or ``they are collecting an 
account that I don't own,'' which is really a confusion 
complaint and not necessarily a malfeasance complaint.
    Mr. Rose. Mr. Bedard?
    Mr. Bedard. Those specific things that Sarah just mentioned 
help consumers understand better who is contacting them, why 
they are being contacted, and the debt for which they are being 
contacted.
    Mr. Rose. Thank you.
    Another concern raised by both the Independent Community 
Bankers of America (ICBA) and the Community Financial Services 
Association of America (CFSA) is regarding the call 
limitations. As ICBA notes in their comments, activities should 
not presumptively be deemed harassment if a debt collector 
wants to follow up with a consumer.
    Mr. Bedard, Ms. Auchterlonie, is there a scenario where a 
consumer who has fallen into collections could benefit from a 
phone call or an email communication from a debt collector?
    Mr. Bedard. The answer is yes, especially for those 
consumers who may not even know that they have an account that 
has fallen delinquent or in default. A text message, an email, 
or a phone call is welcome to those consumers who are concerned 
about their accounts and they are interested in keeping abreast 
of what is happening on their credit. So the answer is, yes, it 
is very helpful for consumers to receive those kind of 
communications.
    Ms. Auchterlonie. And I would also add that when you are in 
the process of negotiating some sort of long-term payment 
arrangement, that often takes a couple of different calls, 
particularly if you are going to get bank account statements or 
need to talk to a spouse and whatnot.
    Mr. Rose. Okay. Thank you.
    I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from Pennsylvania, Ms. Dean, is recognized 
for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman, and I thank you for 
convening this important hearing on debt collection practices.
    As I am sitting here, I am reminded of a constituent of 
mine, whom I believe is 100- or 101-years-old, a friend and a 
constituent, but he is a wonderful man, and he has talked to me 
for the last 10 years about something he would like to talk 
about. He said we name all kinds of ills in our society. We 
name the ill of racism. We name the ill of sexism and many 
other ``isms.'' He said it is time we named ``poorism,'' 
because how we treat the poor reflects how we treat the most 
vulnerable among us.
    So, I try to use the word, ``poorism.'' I am hoping it will 
catch on, on behalf of my friend, because he is darn smart.
    I want to talk about something that you have talked about, 
Commissioner, and as most of the witnesses have talked about. 
With student loan debt at the rate of $1.5 trillion in this 
country, it is saddling our young people, it is stymieing our 
economy. And, of course, so many young people falling into 
default, delinquency. And, as you say, they look like they are 
the bad guy, and they are not the bad guy.
    Commissioner Chopra, given your experience as the former 
CFPB Student Loan Ombudsman, I am wondering if you could tell 
me what you saw in that capacity, and if you could reflect on 
the fact that that space was left empty by this Administration, 
for I think as much as a year. What impact might that have had 
on protecting our student loan debt holders, that may be 
connected to this proposed rule.
    Mr. Chopra. I appreciate the question.
    One of the things that was terrific about what the CFPB did 
is we not only looked at facts and figures, but we listened to 
voices very clearly. And to hear about student loan borrowers 
who were ashamed to go back home for Thanksgiving, who felt 
that there was a specter over their future because of how they 
were being treated, I think that it hits us in the gut about 
what is going to happen to that person's future and, frankly, 
how does that affect all of us?
    One of the things we are going to need the CFPB to do--it 
is the primary regulator of the student loan industry, so if it 
turns a blind eye or if it helps cover up wrongdoing, that is 
not just a disservice to borrowers, it is really a disservice 
to our American brand and our American Dream.
    If people can't go to college and get ahead and instead 
they are worse off, if we see that minorities and women have to 
borrow more and then in the workforce earn less, that is just a 
road to disaster for all of us.
    And I hope that every regulator, State and Federal, can be 
aggressive in cracking down on abuses.
    Ms. Dean. I thank you so much for your work in this area, 
and for your testimony today.
    And then I wanted to turn to you, Reverend. You offered in 
your opening statement that you would be happy to tell some of 
the authentic stories that you have had to listen to, pastor 
to, in both of your careers, in all of your careers. And I 
think of the beatitudes and blessed are the poor.
    Would you mind sharing with us some of those stories? I am 
thinking maybe whether it has to do with minority debt, whether 
it has to do with payday lending, or any other kinds of 
predatory practices.
    Rev. Gould. Certainly. And thank you for the questioning 
and this framework of ``poorism.''
    I have heard testimony of people talking about--it was the 
doctor who bought a new car. That is not the people that I talk 
to, and not the people that other faith leaders encounter on a 
daily basis.
    I'm thinking about a young woman by the name of Jennifer 
who lives in Springfield, Missouri. Jennifer has multiple 
medical problems, and receives disability. Her husband works a 
low-wage job at KFC. They have five children, which includes a 
couple of her sister's children. I think her sister passed.
    Jennifer took out a payday loan to fix her car. Springfield 
is approximately 4 hours from St. Louis, and she was having a 
medical procedure and they needed reliable transportation so 
that she could get to St. Louis, and her family would be able 
to get back and forth while she was there. It was a payday loan 
of $500. They paid it back the best they could for 2 years and 
still had not finished paying it back.
    And one of our programs, a program that was spurred out of 
Missouri Faith Voices, University Hope, a couple of churches 
who put some money together, ended up buying that debt. And 
Jennifer, the shame that she suffered and actually still 
suffers, and they paid it off in 2017, she went before the CFPB 
to share her story and was very proud of her ability to do 
that, but she still calls me, and inboxes me about the struggle 
of just being poor.
    Her son turned 16 on the 25th, and because they have more 
car issues, she was not able to buy him a card or a cake or 
anything. So, some pastors helped her with that.
    But that is the reality of people who are struggling 
because of the extraction of wealth and income out of the 
poorest communities.
    Ms. Dean. Thank you for sharing Jennifer's story, and tell 
Jennifer we are thinking of her.
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Steil, 
is recognized for 5 minutes.
    Mr. Steil. Thank you, Madam Chairwoman, and thank you for 
holding today's hearing.
    Ms. Desai, I appreciate you coming in and sharing your 
story today. In your testimony you noted that between 2004 and 
2014, with the sale of medallions in New York City, that New 
York City made $850 million. Is that accurate?
    Ms. Desai. Yes, that is right.
    Mr. Steil. And at the last auction, they were being sold 
for $800,000 each?
    Ms. Desai. The opening bid.
    Mr. Steil. The opening bid. So in some instances, they are 
selling them beyond $800,000. The opening bid was $800,000. I 
appreciate you clarifying that for me.
    In other words, the elected officials in New York City 
created a really expensive barrier to enter the market, 
generating enormous profits for City Hall on the backs of 
average American workers who are looking to enter the taxicab 
industry.
    To me, it didn't have to be this way. If the medallions 
were sold to drivers who met reasonable certifications 
standards, we wouldn't have seen this cost drive all the way 
up. But effectively, in New York City, elected government 
officials made this decision, to the detriment of many of your 
members.
    I am sympathetic to the hardship that many of your members 
are experiencing today. I appreciate you highlighting this. I 
know my colleague from New York had comments on this earlier, 
the significance of this issue.
    I think, when I walk away from this, watching what New York 
City did in creating, in effect, a legal monopoly, driving the 
costs up well outside of what market rates would have been if 
the government didn't get involved and create a legal monopoly, 
is a real lesson to be learned for other government 
jurisdictions to not get themselves involved in the private 
sector in creating government monopolies and driving costs up, 
which would have avoided a lot of the problems that we are 
seeing here today.
    So, I appreciate you coming and sharing that part of the 
story today.
    I want to shift gears just a little bit to Ms. 
Auchterlonie.
    One of the proposals discussed today would classify small 
business loans as personal loans for the purpose of the Fair 
Debt Collection Practices Act. Could you provide a little 
detail as to the effect that that would have on credit for 
small businesses?
    Ms. Auchterlonie. I think there is a lot of nuance to it, 
and, in fact, there are a lot of small businesses that end up 
getting personal loans in any case because they don't have 
enough credit or enough history as a business, so they have to 
rely on the personal wherewithal of the borrower. So, there is 
a little bit of that happening already out there in the 
marketplace.
    In some sense, it may make some of the small business 
borrowing more transparent and straightforward. I do think that 
you would have to really parse through the Truth in Lending Act 
to determine which provisions of it apply to small businesses 
and which provisions are specifically consumer-oriented.
    It is a long Act. It is very complicated. I would not 
recommend doing this in a couple of days. And I would also say, 
consult with as many experts as you can in doing so.
    Mr. Steil. Thank you very much.
    Mr. Bedard, any additional comments on that topic?
    Mr. Bedard. No more, other than to emphasize the importance 
of the consistency between Truth in Lending and all of the 
other regulations that we know industry needs to comply with, 
including the Fair Debt Collection Practices Act, and others. 
Consistency among them is not an overnight proposition, as she 
just mentioned.
    Mr. Steil. Thank you very much. Thank you for your 
testimony today.
    I yield back.
    Chairwoman Waters. Thank you.
    The gentleman from Illinois, Mr. Garcia, is recognized for 
5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman, and, 
of course, thank you to all of the witnesses who are here today 
to further enlighten us about this pressing issue.
    I would like to ask a question about zombie debt. Under the 
CFPB's proposed rule, debt collectors can trick consumers into 
initiating a debt payment on debt that previously sat outside 
the statute of limitations.
    This is in contravention of many State protections. For 
example, in my home State of Illinois, the statute of 
limitations on most credit card and medical debt is 5 years.
    What's worse, under the proposal, debt collectors are 
prohibited from filing or threatening a lawsuit if the 
collector knows or should know that the legal time limit to sue 
has expired.
    So, I have a few questions.
    Ms. Kuehnhoff, under what types of circumstances should the 
CFPB find a debt collector should have known that a debt was so 
old that it could not be pursued in court?
    Ms. Kuehnhoff. Thank you so much for your question. This is 
an important issue.
    I want to first say that I would strongly argue that the 
CFPB should have a strict liability standard for being held 
responsible instead of a ``should know,'' whether you knew or 
should have known.
    However, if the CFPB does move forward with a ``know or 
should have known'' standard, then I would argue strenuously 
that if there is, for example, documentation that the debt 
collector didn't bother to obtain about the debt that would 
have shown that the debt was time-barred before they sued, they 
should be held responsible, because they should have known 
because they should have obtained that documentation.
    I think this gets back partly to the substantiation issue 
as well that we have been talking about.
    Mr. Garcia of Illinois. As a follow-up, what sorts of 
evidence would show that a debt collector knew that a debt was 
so old it could not be pursued in court?
    Ms. Kuehnhoff. I think that this would get to the records 
that the debt collector has about the account, whether or not 
they have documentation. They would certainly have information 
that was transferred through a database or some other 
mechanism, that would talk about things like, typically, the 
date of last payment, and potentially other dates, if those are 
known.
    Mr. Garcia of Illinois. Commissioner Chopra, any insights 
as a former member of that board?
    Mr. Chopra. One of the things I will add is we also need to 
think about Wall Street and debt buyers and the rising set of 
hedge funds that are purchasing a lot of this old debt, 
creating instruments and also assigning them to create value, 
as they say. You can buy some of this stuff for a half a penny 
on the dollar, and you make a 100 percent return if you can get 
one cent on the dollar.
    So, we really have to track where is all of this debt 
flowing around and what are the incentives that we have to 
attack in order to make sure that people aren't being abused by 
some of the concerns you are raising?
    Mr. Garcia of Illinois. Thank you for getting the macro 
problem of indebtedness out there.
    Last question, Ms. Kuehnhoff, many debt collectors work on 
a contingency basis under which fees increase with the age of 
the debt. In light of this fact, do you agree that this makes 
zombie debt more lucrative to debt collectors than newer debts?
    Ms. Kuehnhoff. I think that the rate of return would also 
depend on how many people pay. So if you are getting paid more 
per debt that is older, you would still need to convince people 
to pay them.
    But certainly there can be problems with incentive 
structures, and we have called for a prohibition on the 
collection of time-barred debt because we think that there are 
a lot of concerns about not having information and 
documentation to prove that this amount is owed, and to make 
sure that you are collecting from the right person, and 
collecting the right amount.
    So, I would be concerned about aligning incentives to 
encourage collection of potential accounts for which you don't 
have documentation.
    Mr. Garcia of Illinois. Does the proposed rule create an 
incentive for creditors to pursue old debt?
    Ms. Kuehnhoff. I think that by deviating from the strict 
liability standard, it creates an incentive to attempt to not 
know what the--whether or not an account is time-barred. Again, 
we would argue for a strict interpretation.
    Mr. Garcia of Illinois. Thank you.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The gentleman from New York, Mr. Zeldin, is recognized for 
5 minutes.
    Mr. Zeldin. Thank to you all of the witnesses who are here. 
And thank you to the chairwoman and the ranking member for 
holding today's hearing.
    Before I get into some of my remarks with regards to this 
issue, the primary issue at hand with the list of bills being 
considered, rules being considered here under the committee, I 
just wanted to specifically touch on the issue with regards to 
the medallions.
    I want to lend my support and concern for those who are 
weighing in, the lessons to be learned with regards to the rise 
of value and then the fall in the value of the medallions, the 
people who are hurt drastically in that process because of 
decisions made by people inside of government and out of 
government.
    I was in the State Senate before I came here. I saw some of 
the decisions made up in Albany, artificially increasing and 
ultimately leading to the collapse that we saw of the medallion 
pricing.
    So it is an issue that I am pleased to see in front of the 
committee today. I lend my support to any of my colleagues on 
the other side of the aisle who would be interested in working 
together on whatever would be appropriate here in Congress.
    While no industry is immune from bad actors, debt 
collection agencies can provide practical options to help 
consumers pay off their debt. On Long Island, many of the debts 
being serviced by debt collectors are held by small, 
independent businesses that do not have the means to collect on 
their own debt. To have a financial system that works, both 
businesses and customers need to hold up their end of the 
bargain.
    Businesses will not be able to extend credit to or provide 
goods and services for our nation's job creators and consumers 
without being repaid. However, borrowers should not be harassed 
or treated with harm in any debt collection practices. That is 
why it is important that the CFPB proposed its rule on debt 
collection under the Fair Debt Collection Practices Act 
(FDCPA).
    Modernization of the FDCPA is long overdue; and this is a 
step in the right direction, helping to protect consumers from 
harmful debt collection practices.
    Open communications between borrowers and debt collectors 
is key to a fully functioning credit system. The existing data 
collection rules are outdated and fail to take into account 
advances in communication technology.
    When the FDCPA was passed in 1977, email and text messages 
were not even in existence. I haven't met many millennials who 
prefer to communicate via letters in the mail or a phone call 
over receiving an email or text. It is absurd that the 
guidelines for this industry are stuck in the 1970s.
    Rules of the road for clear, modern communication are good 
for both consumers and businesses. Overly burdensome 
restrictions on debt collection practices can ultimately hinder 
consumers' ability to access credit products and make them more 
costly for everyone.
    Ms. Auchterlonie, there have been many who argue that the 
CFPB's proposed rule will open the floodgates to abusive emails 
and text messages from the debt collection industry. Is that a 
valid concern? And are there any compliance steps that have to 
be completed to send emails and texts?
    Ms. Auchterlonie. Right. The text of the FDCPA itself 
prohibits abusive communications, all communications, and that 
is not just telephone but all communications. So, we have that 
inherently built into the statute.
    But in addition to that, we also have the specific rules 
that the CFPB implemented that require opt-out mechanisms, and 
it is the same sort of opt-out mechanisms you get with 
commercial or store emails and so on. So, there is an 
opportunity for consumers to choose the medium in which they 
communicate with their collection agency.
    Mr. Zeldin. And I concur with a comment that was made a 
little bit earlier by my colleague from Kentucky, Mr. Barr. He 
was sharing his thoughts on, if you incur a debt, you have an 
obligation to pay it back.
    And as I pointed out, a lot of the debts owed where I am 
from in the First Congressional District of New York are owed 
to small businesses, and they are desperately relying on being 
able to have those obligations fulfilled in order to be able to 
pay their bills and to be able to stay in business.
    It is an important philosophy, I think, for us to 
understand that key part of it, and that there are debt 
collectors who, just like every other industry, give their 
industry a bad name by abusing the rules of the road, and at 
the same time, there are some debt collectors near and around 
New York 1, my congressional district, who follow the rules 
and, when you change the rules, they will follow the new rules. 
They are doing a good job, responsibly representing their 
industry, and I think it is also important that we work to have 
the right rules for them.
    I yield back, and I again thank the Chair for holding 
today's hearing.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from Texas, Ms. Garcia, is recognized for 5 
minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank 
you for this hearing today.
    I want to apologize to all of the witnesses. I did have to 
step out for a competing committee hearing on ICE detention 
centers that the Judiciary Committee was holding. But what 
really strikes me is how the 2 hearings are really kind of 
related, because there, we were talking about detention and the 
almost incarceration-like facilities for basically poor people 
and vulnerable populations and here, we are talking about debt 
collection of, as you said, Reverend Gould, the poorest of the 
poor.
    So I am going to focus on racial disparities in debt 
collection as it impacts poor people. And, Ms. Jimenez, I 
wanted to start with you.
    Can you talk about the relationship between the racial 
wealth gap and how it contributes to these debt collection 
practices? Because especially when we go to the courts, it 
hurts poor people more, doesn't it?
    Ms. Jimenez. Absolutely. And I thank you for that question.
    The racial wealth gap is something that obviously 
transcends debt collection. The financial position of African 
Americans, in particular, in this country is a product of 
obviously a lengthy history, beginning with slavery, exclusion 
from holding property and government land grants, 
discrimination in housing, and a litany of exclusionary 
policies that hindered access to home ownership and wealth 
building.
    And so we have a situation where the median wealth of white 
households is 13 times the median wealth of Black households, 
and people of color, African Americans in particular, face 
basically a perfect storm of events that lead them ultimately 
to be collected upon, called, sued, and have judgments against 
them far more than their white counterparts.
    Ms. Garcia of Texas. Wages garnished.
    Ms. Jimenez. Yes, all of that.
    Ms. Garcia of Texas. Do you have numbers for what the 
impact is on the Latino population?
    Ms. Jimenez. I'm sorry?
    Ms. Garcia of Texas. Do you have numbers for the Latino 
population? Are they similar, or the same?
    Ms. Jimenez. The Latino population numbers are similar, not 
as stark, I guess I would say.
    Ms. Garcia of Texas. Again, in another hearing that we had 
earlier--this is like my eighth hearing this week, so I forget 
which one it was--but we talked about how long it would take an 
African-American woman to kind of catch up with the wealth gap. 
And I was just completely blown away. It would take an African-
American woman 100 years, and Latinas 200 years. So, none of us 
here will benefit from any of that. In fact, I think it 
probably just gets worse.
    Reverend Gould, I am going go back to you. Like you, I 
don't wear the collar, but I am a woman of faith, and for me it 
is about making sure that people don't get poor. I still 
remember a consumer advocate commentator in one of the local 
broadcast stations in Houston who always used to close his 
program with, ``It is hell to be poor.'' Sure is, isn't it?
    What can we do to help to lift up those communities, 
particularly when it comes to payday lenders?
    Rev. Gould. I think we have to take--we have to actually 
own all of the history in this country, own what 400 years of 
enslavement has done to African Americans and our communities. 
I really think the reparations conversation is a part of this 
conversation as well.
    Ms. Garcia of Texas. We have had a hearing in the Judiciary 
Committee.
    Rev. Gould. Yes.
    And so, it is all connected. I spoke earlier about the 
community of Ferguson, outside of St. Louis, a community that 
is 67 percent African American, and 23 percent of the income in 
2014 came from traffic stops.
    So, it is all predatory. It is not just payday lenders, but 
there are also big businesses.
    One of the things that we--
    Ms. Garcia of Texas. I am glad you mentioned traffic stops, 
because I know that even for traffic tickets, parking tickets, 
ambulance fees, the public sector is not free from any of these 
issues either, are they?
    Rev. Gould. That is absolutely correct.
    Ms. Garcia of Texas. Governments also hire outside debt 
collectors to collect fees.
    Rev. Gould. Yes. In Missouri, we have had for the last 19 
years the attorney general's report that gives us a vehicular 
stops report, and it goes up every year, 4 times the number of 
African Americans and other people of color being stopped. 
Well, you are stopped and you are fined and you are fined more 
than your white counterpart. You work a low-wage job. So it is 
double, triple, quadruple jeopardy.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman. I yield 
back.
    Chairwoman Waters. Thank you.
    The gentleman from Arkansas, Mr. Hill, is recognized for 5 
minutes.
    Mr. Hill. Thank you, Madam Chairwoman. Thank you for 
holding this hearing today.
    And I thank the witnesses for this long engagement you have 
had here. We appreciate your forbearance.
    As a former commercial banker and lender on and off over 
the years, I certainly understand the importance of these 
issues and how important it is to try to lend money in a fair 
way and collect it in a fair way. And I have really appreciated 
the points of view that you have brought to the hearing today.
    I want to talk about H.R. 4403, the Stop Debt Collection 
Abuse Act, which I cosponsored with my friend, Mr. Cleaver from 
Missouri. This was a bill that we had in the last Congress that 
we worked on with Mr. Ellison and Mrs. Love, and it safeguards 
American consumers by strengthening consumer protections 
against predatory debt collection practices, but this time by 
the government.
    It seems to me that we have talked about the Fair Debt 
Collection Practices Act at length today, which has been in 
effect since 1977, but it has always been intriguing to me that 
one of the ambiguities in that law, and also subsequent court 
cases and interpretation, has facilitated a situation where 
debt collection companies that work on behalf of government 
agencies aren't covered.
    So this really kind of strikes at the heart of the fairness 
issue, claiming that debt with a government entity does not 
qualify as consumer debt.
    One only has to review the consumer complaints, the 
lawsuits, to find records of confusing and troubling stories 
around many instances where this has created problems across 
the country. And even if you look at that as anecdotal 
information generally, in many instances they are hitting a 
tack with a sledgehammer.
    A sad story that I certainly connected with, because I do 
so much work with our veterans, is the veteran in Houston who 
had a $1.25 toll debt. Now, I have two kids in college, so I 
know about those bills when they come in the mail. It said that 
someone was--it is the only way I know that they are on a toll 
road or where they were, is by virtue of the unpaid toll tag 
response that comes to Dad.
    But, $1.25. And this veteran starts getting the calls. He 
doesn't know what is going on, and he is confused by it. He is 
an older man. And he ends up having to pay $300 to settle a 
$1.25 toll.
    And that is the kind of thing, we talk about it all day, 
this is your world, obviously, but this is where I think Mr. 
Cleaver and I are trying to operate. This is the world where we 
are trying to simply clarify the debt collection practices for 
debt collection agents hired by a Federal Government agency, 
that this law applies to them, just like it applies to the 
private sector. How could that be complicated or unfair?
    So, that is what this Act does. I think it is a good step. 
And I appreciate Mr. Cleaver partnering with me on it.
    Does anyone disagree that an agent working on behalf of a 
government agency should be covered by the same laws that 
private debt collectors are?
    I am going to do it in reverse. Does anybody disagree with 
that?
    Ms. Auchterlonie. No, sir. 
    Mr. Hill. Okay. Thank you for that.
    Ms. Auchterlonie, would you speak to the benefits of 
clearing up some of those ambiguities? It is 40 years in the 
making, but it is clearly a problem. Would you give your views 
on that?
    Ms. Auchterlonie. When I was at the Bureau, I actually had 
an enforcement investigation that was really similar, related 
to district attorneys giving a collection agency the power to 
collect on bad checks. And we ended up settling with them for a 
significant amount of money and asking them to change their 
practices.
    Because a lot of times, the government agencies are charged 
with the responsibility to collect these fines, but they are 
public servants. They are not professional bankers. They are 
not professional financiers or collectors. They don't 
understand the rules of the road. And so, they don't really 
have the professional expertise to oversee and ensure that the 
collection agencies that they are working with are using best 
practices and treating their constituents the way that someone 
else would prefer to treat a customer.
    So, I can see some advantages to and where you are coming 
from on this.
    Mr. Hill. Good.
    I want to thank all of you for your testimony.
    And thank you, Madam Chairwoman. And I yield back the 
balance of my time.
    Chairwoman Waters. Thank you very much.
    Allow me to take a moment to thank all of our distinguished 
witnesses for their testimony here today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And with that, this hearing is adjourned. Thank you all so 
very much.
    [Whereupon, at 1:25 p.m., the hearing was adjourned.]

                            A P P E N D I X



                           September 26, 2019
                           
                           
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