[House Report 115-892]
[From the U.S. Government Publishing Office]
115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-892
======================================================================
PRACTICE OF LAW TECHNICAL CLARIFICATION ACT OF 2018
_______
August 7, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 5082]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 5082) to amend the Fair Debt Collection
Practices Act to exclude law firms and licensed attorneys who
are engaged in activities related to legal proceedings from the
definition of a debt collector, to amend the Consumer Financial
Protection Act of 2010 to prevent the Bureau of Consumer
Financial Protection from exercising supervisory or enforcement
authority with respect to attorneys when undertaking certain
actions related to legal proceedings, and for other purposes,
having considered the same, report favorably thereon without
amendment and recommend that the bill do pass.
Purpose and Summary
Introduced by Representative Alex Mooney on February 23,
2018, H.R. 5082, the ``Practice of Law Technical Clarification
Act of 2018'', amends the Fair Debt Collection Practices Act
(FDCPA) [P.L. 95-109] to exclude from the definition of ``debt
collector'' any law firm or licensed attorney engaged in
litigation activities in connection with a legal action in a
court of law to collect a debt on behalf of a client to the
extent that such legal action is served on the defendant
debtor, or service is attempted, in accordance with the
applicable statute or rules of civil procedure. These
activities include:
(1) Serving, filing, or conveying formal legal
pleadings, discovery requests, or other documents
pursuant to the applicable rules of civil procedure; or
(2) Communicating in, or at the direction of, a court
of law, or in the enforcement of a judgment; or
(3) Any other activities engaged in as part of the
practice of law, under the laws of a State in which the
attorney is licensed, that relate to the legal action.
This bill also amends the Dodd-Frank Wall Street Reform and
Consumer Financial Protection Act of 2010 [P.L. 111-203] to
clarify that the Bureau of Consumer Financial Protection (BCFP
or Bureau) may not exercise supervisory or enforcement
authority with respect to attorneys engaged in the practice of
law and not offering or providing consumer financial products
or services.
Background and Need for Legislation
Title X of the Dodd-Frank Act gave the BCFP expansive
supervisory authority over debt collection. Under its ``larger
participant'' rule, the Bureau can supervise debt collectors
and debt buyers with more than $10 million in annual receipts.
The BCFP also has supervisory authority over service providers
to large insured depository institutions as well as service
providers to nonbank mortgage originators, payday lenders, and
private student loan lenders. Those service providers can
include third-party debt collectors, regardless of the
collector's size.
In addition to giving the Bureau broad authority over debt
collection activities, the Dodd-Frank Act also transferred
Federal Debt Collection Practices Act (FDCPA) enforcement
authority to the Bureau, and gave it FDCPA rulemaking
authority. The FDCPA was originally enforced by the Federal
Trade Commission (FTC), which did not have rulemaking
authority. The FDCPA was enacted to eliminate abusive debt
collection practices by debt collectors, ensure industry parity
for debt collectors who refrain from using abusive debt
collection practices, and promote consistent State action to
protect consumers against debt collection abuses.
Under the FDCPA, debt collectors are prohibited from taking
certain actions, including: contacting a consumer at any
unusual or inconvenient time or place; harassing or abusing a
consumer; communicating with third parties regarding a
consumer's debt, except for the purpose of locating the
consumer; and contacting a consumer if that consumer has
notified the debt collector that the consumer refuses to pay
the debt or that he wishes the debt collector to cease
communication, except that the debt collector may still contact
the consumer to notify him that the communication will stop or
that the debt collector or creditor intends to take further
action. A debt collector who violates any provision of the
FDCPA is subject to civil liability as well as a private cause
of action.
The FDCPA applies only to third-party debt collectors,
which are defined as ``any person who uses any instrumentality
of interstate commerce or the mails in any business the
principal purpose of which is the collection of any debts, or
who regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or due
another.''\1\ There are certain instances in which attorneys
will be considered debt collectors and subject to compliance
with the FDCPA. Current legal interpretation considers a lawyer
who regularly tries to obtain payment of consumer debts through
litigation to be a person who ``regularly collects or attempts
to collect . . . debts owed'' in the definition of debt
collector. Because of this, such a lawyer can expose himself to
liability by failing to comport with the FDCPA's strictures and
obligations--including the obligation to provide to consumers
certain notices of their rights. As a result, attorneys trying
collection cases in state court are routinely sued in federal
court for technical violations of the FDCPA, even though they
are undertaking litigation-related attorney conduct.
---------------------------------------------------------------------------
\1\15 U.S.C. Sec. 1692(a)(6).
---------------------------------------------------------------------------
However, there are also a number of classes of persons
expressly excluded from the definition of ``debt collector.''
There is also an explicit exclusion for the ``practice of law''
included in Section 1027(e) of the Dodd-Frank Act:
[T]he Bureau may not exercise any supervisory or
enforcement authority with respect to an activity
engaged in by an attorney as part of the practice of
law under the laws of a State in which the attorney is
licensed to practice law. . . . [unless it covers] the
offering or provision of a consumer financial product
or service . . . that is otherwise offered or provided
by the attorney in question with respect to any
consumer who is not receiving legal advice or services
from the attorney in connection with such financial
product or service.
Currently, this provision has been construed to treat an
attorney representing a creditor in a legal action against a
debtor as having ``offered or provided'' a financial product or
service. Therefore, under the current interpretation, an
attorney that sues a debtor to collect a debt is providing the
debtor with a financial product or service, and the BCFP may
exercise its supervisory or enforcement authority against
attorneys practicing debt collection or representing lenders in
loan transactions.
Although Section 1027(e) of the Dodd-Frank Act exempts most
consumer lawyers from the BCFP's authority, it may not apply to
some creditor lawyers. As the American Bar Association noted
``as ``officers of the court,'' lawyers are subject to strict
ethical rules and disciplinary action for any misconduct,
including potential suspension or disbarment. Therefore,
further regulation by the CFPB, other agencies, or Congress is
unnecessary and is likely to conflict with regulation and
oversight by the judicial branch of government.''\2\ H.R. 5082
would restore Congressional intent and clarify that the BCFP
does not have authority to regulate the practice of law, which
is the purview of the state bar licensing system. H.R. 5082 is
a narrow bill that exempts only lawyers engaged in actual
litigation that seek collection on a client's behalf.
---------------------------------------------------------------------------
\2\ https://www.americanbar.org/content/dam/aba/uncategorized/GAO/
abaonepagersupportinghr
5082-march2018.authcheckdam.pdf.
---------------------------------------------------------------------------
Hearings
The Subcommittee on Financial Institutions held a hearing
examining matters relating to H.R. 5082 on September 7, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
March 21, 2018, and ordered H.R. 5082 to be reported favorably
to the without amendment by a recorded vote of 35 yeas to 25
nays (recorded vote no. FC-169), a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House without amendment. The
motion was agreed to by a recorded vote of 35 yeas to 25 nays
(Record vote no. FC-169), a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 5082
will exempt lawyers engaged in actual litigation that seek
collection on a client's behalf. This legislative construction
allays opposition concerns that debt collectors will abuse the
exemption and employ licensed attorneys to collect debts.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 2, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 5082, the Practice
of Law Technical Clarification Act of 2018.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 5082--Practice of Law Technical Clarification Act of 2018
Under current law, the Consumer Financial Protection Bureau
(CFPB) and the Federal Trade Commission (FTC) share enforcement
authority over the Fair Debt Collection Practices Act (FDCPA).
The CFPB retains supervisory and rulemaking authority under
that act. For the purposes of the FDCPA, H.R. 5082 would exempt
law firms and licensed attorneys from being defined as ``debt
collectors'' when they are engaged in certain litigation
activities connected to collecting debt on behalf of a client.
Using information from the affected agencies, CBO estimates
that implementing H.R. 5082 would have an insignificant effect
on costs for the FTC and would cost the CFPB less than $500,000
to make required changes to a planned rulemaking. The costs for
the CFPB are treated as direct spending in the budget.
CBO also estimates that implementing H.R. 5082 could reduce
the CFPB's and FTC's collections of civil penalties, which are
recorded in the budget as revenues, by slightly limiting the
scope of enforcement cases that the agencies may pursue.
Because the CFPB can spend the penalties it collects, the
reduction in penalties would also reduce the subsequent direct
spending of those funds. However, CBO estimates that the
effects on revenues and direct spending would not be
significant over the 2018-2028 period.
Because enacting the bill would affect direct spending and
revenues, pay-as-you-go procedures apply.
CBO estimates that enacting H.R. 5082 would not
significantly increase net direct spending or on-budget
deficits in any of the four consecutive 10-year periods
beginning in 2029.
H.R. 5082 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was reviewed by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires no
directed rule makings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 5082 as the ``Practice of Law
Technical Clarification Act of 2018.''
Section 2. Exclusion of law firms and attorneys from the definition of
debt collector when engaged in the practice of law
This section amends Section 803(6) of the Fair Debt
Collection Practices Act (15 U.S.C. 1692a(6)) to exclude law
firms and attorneys engaged in litigation activities in
connection with a legal action in a court of law to collect a
debt on behalf of a client, including:
(1) Serving, filing, or conveying formal legal
pleadings, discovery requests, or other documents
pursuant to the applicable rules of civil procedure; or
(2) Communicating in, or at the direction of, a court
of law, or in the enforcement of a judgment; or
(3) any other activities engaged in as part of the
practice of law, under the laws of a State in which the
attorney is licensed, that relate to the legal action.
Section 3. Amendment to bureau authority with respect to practice of
law
This sections amends Section 1027(e)(2)(B) of the Consumer
Financial Protection Act of 2010 (12 U.S.C. 5517(e)(2)(B) to
clarify that the Consumer Financial Protection Bureau may not
exercise supervisory or enforcement authority with respect to
attorneys engaged in the practice of law and not offering or
providing consumer financial products or services.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
FAIR DEBT COLLECTION PRACTICES ACT
* * * * * * *
TITLE VIII--DEBT COLLECTION PRACTICES
* * * * * * *
Sec. 803. Definitions
As used in this title--
(1) The term ``Bureau'' means the Bureau of Consumer
Financial Protection.
(2) The term ``communication'' means the conveying of
information regarding a debt directly or indirectly to
any person through any medium.
(3) The term ``consumer'' means any natural person
obligated or allegedly obligated to pay any debt.
(4) The term ``creditor'' means any person who offers
or extends credit creating a debt or to whom a debt is
owed, but such term does not include any person to the
extent that he receives an assignment or transfer of a
debt in default solely for the purpose of facilitating
collection of such debt for another.
(5) The term ``debt'' means any obligation or alleged
obligation of a consumer to pay money arising out of a
transaction in which the money, property, insurance, or
services which are the subject of the transaction are
primarily for personal, family, or household purposes,
whether or not such obligation has been reduced to
judgment.
(6) The term ``debt collector'' means any person who
uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is
the collection of any debts, or who regularly collects
or attempts to collect, directly or indirectly, debts
owed or due or asserted to be owed or due another.
Notwithstanding the exclusion provided by clause (F) of
the last sentence of this paragraph, the term includes
any creditor who, in the process of collecting his own
debts, uses any name other than his own which would
indicate that a third person is collecting or
attempting to collect such debts. For the purpose of
section 808(6), such term also includes any person who
uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is
the enforcement of security interests. The term does
not include--
(A) any officer or employee of a creditor
while, in the name of the creditor, collecting
debts for such creditor;
(B) any person while acting as a debt
collector for another person, both of whom are
related by common ownership or affiliated by
corporate control, if the person acting as a
debt collector does so only for persons to whom
it is so related or affilated and if the
principal business of such person is not the
collection of debts;
(C) any officer or employee of the United
States or any State to the extent that
collecting or attempting to collect any debt is
in the performance of his official duties;
(D) any person while serving or attempting to
serve legal process on any other person in
connection with the judicial enforcement of any
debt;
(E) any nonprofit organization which, at the
request of consumers, performs bona fide
consumer credit counseling and assists
consumers in the liquidation of their debts by
receiving payments from such consumers and
distributing such amounts to creditors;
(F) any law firm or licensed attorney, to the
extent that--
(i) such firm or attorney is engaged
in litigation activities in connection
with a legal action in a court of law
to collect a debt on behalf of a
client, including--
(I) serving, filing, or
conveying formal legal
pleadings, discovery requests,
or other documents pursuant to
the applicable statute or rules
of civil procedure;
(II) communicating in, or at
the direction of, a court of
law (including in depositions
or settlement conferences) or
in the enforcement of a
judgment; or
(III) any other activities
engaged in as part of the
practice of law, under the laws
of a State in which the
attorney is licensed, that
relate to the legal action; and
(ii) such legal action is served on
the defendant debtor, or service is
attempted, in accordance with the
applicable statute or rules of civil
procedure; and
[(F)] (G) any person collecting or attempting
to collect any debt owed or due or asserted to
be owed or due another to the extent such
activity (i) is incidental to a bona fide
fiduciary obligation or a bona fide escrow
arrangement; (ii) concerns a debt which was
originated by such person; (iii) concerns a
debt which was not in default at the time it
was obtained by such person; or (iv) concerns a
debt obtained by such person as a secured party
in a commercial credit transaction involving
the creditor.
(7) The term ``location information'' means a
consumer's place of abode and his telephone number at
such place, or his place of employment.
(8) The term ``State'' means any State, territory, or
possession of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or any
political subdivision of any of the foregoing.
* * * * * * *
----------
CONSUMER FINANCIAL PROTECTION ACT OF 2010
* * * * * * *
TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION
* * * * * * *
Subtitle B--General Powers of the Bureau
* * * * * * *
SEC. 1027. LIMITATIONS ON AUTHORITIES OF THE BUREAU; PRESERVATION OF
AUTHORITIES.
(a) Exclusion for Merchants, Retailers, and Other Sellers of
Nonfinancial Goods or Services.--
(1) Sale or brokerage of nonfinancial good or
service.--The Bureau may not exercise any rulemaking,
supervisory, enforcement or other authority under this
title with respect to a person who is a merchant,
retailer, or seller of any nonfinancial good or service
and is engaged in the sale or brokerage of such
nonfinancial good or service, except to the extent that
such person is engaged in offering or providing any
consumer financial product or service, or is otherwise
subject to any enumerated consumer law or any law for
which authorities are transferred under subtitle F or
H.
(2) Offering or provision of certain consumer
financial products or services in connection with the
sale or brokerage of nonfinancial good or service.--
(A) In general.--Except as provided in
subparagraph (B), and subject to subparagraph
(C), the Bureau may not exercise any
rulemaking, supervisory, enforcement, or other
authority under this title with respect to a
merchant, retailer, or seller of nonfinancial
goods or services, but only to the extent that
such person--
(i) extends credit directly to a
consumer, in a case in which the good
or service being provided is not itself
a consumer financial product or service
(other than credit described in this
subparagraph), exclusively for the
purpose of enabling that consumer to
purchase such nonfinancial good or
service directly from the merchant,
retailer, or seller;
(ii) directly, or through an
agreement with another person, collects
debt arising from credit extended as
described in clause (i); or
(iii) sells or conveys debt described
in clause (i) that is delinquent or
otherwise in default.
(B) Applicability.--Subparagraph (A) does not
apply to any credit transaction or collection
of debt, other than as described in
subparagraph (C)(i), arising from a transaction
described in subparagraph (A)--
(i) in which the merchant, retailer,
or seller of nonfinancial goods or
services assigns, sells or otherwise
conveys to another person such debt
owed by the consumer (except for a sale
of debt that is delinquent or otherwise
in default, as described in
subparagraph (A)(iii));
(ii) in which the credit extended
significantly exceeds the market value
of the nonfinancial good or service
provided, or the Bureau otherwise finds
that the sale of the nonfinancial good
or service is done as a subterfuge, so
as to evade or circumvent the
provisions of this title; or
(iii) in which the merchant,
retailer, or seller of nonfinancial
goods or services regularly extends
credit and the credit is subject to a
finance charge.
(C) Limitations.--
(i) In general.--Notwithstanding
subparagraph (B), subparagraph (A)
shall apply with respect to a merchant,
retailer, or seller of nonfinancial
goods or services that is not engaged
significantly in offering or providing
consumer financial products or
services.
(ii) Exception.--Subparagraph (A) and
clause (i) of this subparagraph do not
apply to any merchant, retailer, or
seller of nonfinancial goods or
services--
(I) if such merchant,
retailer, or seller of
nonfinancial goods or services
is engaged in a transaction
described in subparagraph
(B)(i) or (B)(ii); or
(II) to the extent that such
merchant, retailer, or seller
is subject to any enumerated
consumer law or any law for
which authorities are
transferred under subtitle F or
H, but the Bureau may exercise
such authority only with
respect to that law.
(D) Rules.--
(i) Authority of other agencies.--No
provision of this title shall be
construed as modifying, limiting, or
superseding the supervisory or
enforcement authority of the Federal
Trade Commission or any other agency
(other than the Bureau) with respect to
credit extended, or the collection of
debt arising from such extension,
directly by a merchant or retailer to a
consumer exclusively for the purpose of
enabling that consumer to purchase
nonfinancial goods or services directly
from the merchant or retailer.
(ii) Small businesses.--A merchant,
retailer, or seller of nonfinancial
goods or services that would otherwise
be subject to the authority of the
Bureau solely by virtue of the
application of subparagraph (B)(iii)
shall be deemed not to be engaged
significantly in offering or providing
consumer financial products or services
under subparagraph (C)(i), if such
person--
(I) only extends credit for
the sale of nonfinancial goods
or services, as described in
subparagraph (A)(i);
(II) retains such credit on
its own accounts (except to
sell or convey such debt that
is delinquent or otherwise in
default); and
(III) meets the relevant
industry size threshold to be a
small business concern, based
on annual receipts, pursuant to
section 3 of the Small Business
Act (15 U.S.C. 632) and the
implementing rules thereunder.
(iii) Initial year.--A merchant,
retailer, or seller of nonfinancial
goods or services shall be deemed to
meet the relevant industry size
threshold described in clause (ii)(III)
during the first year of operations of
that business concern if, during that
year, the receipts of that business
concern reasonably are expected to meet
that size threshold.
(iv) Other standards for small
business.--With respect to a merchant,
retailer, or seller of nonfinancial
goods or services that is a classified
on a basis other than annual receipts
for the purposes of section 3 of the
Small Business Act (15 U.S.C. 632) and
the implementing rules thereunder, such
merchant, retailer, or seller shall be
deemed to meet the relevant industry
size threshold described in clause
(ii)(III) if such merchant, retailer,
or seller meets the relevant industry
size threshold to be a small business
concern based on the number of
employees, or other such applicable
measure, established under that Act.
(E) Exception from state enforcement.--To the
extent that the Bureau may not exercise
authority under this subsection with respect to
a merchant, retailer, or seller of nonfinancial
goods or services, no action by a State
attorney general or State regulator with
respect to a claim made under this title may be
brought under subsection 1042(a), with respect
to an activity described in any of clauses (i)
through (iii) of subparagraph (A) by such
merchant, retailer, or seller of nonfinancial
goods or services.
(b) Exclusion for Real Estate Brokerage Activities.--
(1) Real estate brokerage activities excluded.--
Without limiting subsection (a), and except as
permitted in paragraph (2), the Bureau may not exercise
any rulemaking, supervisory, enforcement, or other
authority under this title with respect to a person
that is licensed or registered as a real estate broker
or real estate agent, in accordance with State law, to
the extent that such person--
(A) acts as a real estate agent or broker for
a buyer, seller, lessor, or lessee of real
property;
(B) brings together parties interested in the
sale, purchase, lease, rental, or exchange of
real property;
(C) negotiates, on behalf of any party, any
portion of a contract relating to the sale,
purchase, lease, rental, or exchange of real
property (other than in connection with the
provision of financing with respect to any such
transaction); or
(D) offers to engage in any activity, or act
in any capacity, described in subparagraph (A),
(B), or (C).
(2) Description of activities.--The Bureau may
exercise rulemaking, supervisory, enforcement, or other
authority under this title with respect to a person
described in paragraph (1) when such person is--
(A) engaged in an activity of offering or
providing any consumer financial product or
service, except that the Bureau may exercise
such authority only with respect to that
activity; or
(B) otherwise subject to any enumerated
consumer law or any law for which authorities
are transferred under subtitle F or H, but the
Bureau may exercise such authority only with
respect to that law.
(c) Exclusion for Manufactured Home Retailers and Modular
Home Retailers.--
(1) In general.--The Director may not exercise any
rulemaking, supervisory, enforcement, or other
authority over a person to the extent that--
(A) such person is not described in paragraph
(2); and
(B) such person--
(i) acts as an agent or broker for a
buyer or seller of a manufactured home
or a modular home;
(ii) facilitates the purchase by a
consumer of a manufactured home or
modular home, by negotiating the
purchase price or terms of the sales
contract (other than providing
financing with respect to such
transaction); or
(iii) offers to engage in any
activity described in clause (i) or
(ii).
(2) Description of activities.--A person is described
in this paragraph to the extent that such person is
engaged in the offering or provision of any consumer
financial product or service or is otherwise subject to
any enumerated consumer law or any law for which
authorities are transferred under subtitle F or H.
(3) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Manufactured home.--The term
``manufactured home'' has the same meaning as
in section 603 of the National Manufactured
Housing Construction and Safety Standards Act
of 1974 (42 U.S.C. 5402).
(B) Modular home.--The term ``modular home''
means a house built in a factory in 2 or more
modules that meet the State or local building
codes where the house will be located, and
where such modules are transported to the
building site, installed on foundations, and
completed.
(d) Exclusion for Accountants and Tax Preparers.--
(1) In general.--Except as permitted in paragraph
(2), the Bureau may not exercise any rulemaking,
supervisory, enforcement, or other authority over--
(A) any person that is a certified public
accountant, permitted to practice as a
certified public accounting firm, or certified
or licensed for such purpose by a State, or any
individual who is employed by or holds an
ownership interest with respect to a person
described in this subparagraph, when such
person is performing or offering to perform--
(i) customary and usual accounting
activities, including the provision of
accounting, tax, advisory, or other
services that are subject to the
regulatory authority of a State board
of accountancy or a Federal authority;
or
(ii) other services that are
incidental to such customary and usual
accounting activities, to the extent
that such incidental services are not
offered or provided--
(I) by the person separate
and apart from such customary
and usual accounting
activities; or
(II) to consumers who are not
receiving such customary and
usual accounting activities; or
(B) any person, other than a person described
in subparagraph (A) that performs income tax
preparation activities for consumers.
(2) Description of activities.--
(A) In general.--Paragraph (1) shall not
apply to any person described in paragraph
(1)(A) or (1)(B) to the extent that such person
is engaged in any activity which is not a
customary and usual accounting activity
described in paragraph (1)(A) or incidental
thereto but which is the offering or provision
of any consumer financial product or service,
except to the extent that a person described in
paragraph (1)(A) is engaged in an activity
which is a customary and usual accounting
activity described in paragraph (1)(A), or
incidental thereto.
(B) Not a customary and usual accounting
activity.--For purposes of this subsection,
extending or brokering credit is not a
customary and usual accounting activity, or
incidental thereto.
(C) Rule of construction.--For purposes of
subparagraphs (A) and (B), a person described
in paragraph (1)(A) shall not be deemed to be
extending credit, if such person is only
extending credit directly to a consumer,
exclusively for the purpose of enabling such
consumer to purchase services described in
clause (i) or (ii) of paragraph (1)(A) directly
from such person, and such credit is--
(i) not subject to a finance charge;
and
(ii) not payable by written agreement
in more than 4 installments.
(D) Other limitations.--Paragraph (1) does
not apply to any person described in paragraph
(1)(A) or (1)(B) that is otherwise subject to
any enumerated consumer law or any law for
which authorities are transferred under
subtitle F or H.
(e) Exclusion for Practice of Law.--
(1) In general.--Except as provided under paragraph
(2), the Bureau may not exercise any supervisory or
enforcement authority with respect to an activity
engaged in by an attorney as part of the practice of
law under the laws of a State in which the attorney is
licensed to practice law.
(2) Rule of construction.--Paragraph (1) shall not be
construed so as to limit the exercise by the Bureau of
any supervisory, enforcement, or other authority
regarding the offering or provision of a consumer
financial product or service described in any
subparagraph of section 1002(5)--
(A) that is not offered or provided as part
of, or incidental to, the practice of law,
occurring exclusively within the scope of the
attorney-client relationship; or
(B) that is otherwise offered or provided by
the attorney in question with respect to any
consumer who is not receiving legal advice or
services from the attorney in connection with
such financial product or service[.], unless
such financial product or service is provided
by a licensed attorney who is not a debt
collector as described under section 803(6)(F)
of the Fair Debt Collection Practices Act.
(3) Existing authority.--Paragraph (1) shall not be
construed so as to limit the authority of the Bureau
with respect to any attorney, to the extent that such
attorney is otherwise subject to any of the enumerated
consumer laws or the authorities transferred under
subtitle F or H.
(f) Exclusion for Persons Regulated by a State Insurance
Regulator.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of any State insurance regulator to adopt
rules, initiate enforcement proceedings, or take any
other action with respect to a person regulated by a
State insurance regulator. Except as provided in
paragraph (2), the Bureau shall have no authority to
exercise any power to enforce this title with respect
to a person regulated by a State insurance regulator.
(2) Description of activities.--Paragraph (1) does
not apply to any person described in such paragraph to
the extent that such person is engaged in the offering
or provision of any consumer financial product or
service or is otherwise subject to any enumerated
consumer law or any law for which authorities are
transferred under subtitle F or H.
(3) State insurance authority under gramm-leach-
bliley.--Notwithstanding paragraph (2), the Bureau
shall not exercise any authorities that are granted a
State insurance authority under section 505(a)(6) of
the Gramm-Leach-Bliley Act with respect to a person
regulated by a State insurance authority.
(g) Exclusion for Employee Benefit and Compensation Plans and
Certain Other Arrangements Under the Internal Revenue Code of
1986.--
(1) Preservation of authority of other agencies.--No
provision of this title shall be construed as altering,
amending, or affecting the authority of the Secretary
of the Treasury, the Secretary of Labor, or the
Commissioner of Internal Revenue to adopt regulations,
initiate enforcement proceedings, or take any actions
with respect to any specified plan or arrangement.
(2) Activities not constituting the offering or
provision of any consumer financial product or
service.--For purposes of this title, a person shall
not be treated as having engaged in the offering or
provision of any consumer financial product or service
solely because such person is--
(A) a specified plan or arrangement;
(B) engaged in the activity of establishing
or maintaining, for the benefit of employees of
such person (or for members of an employee
organization), any specified plan or
arrangement; or
(C) engaged in the activity of establishing
or maintaining a qualified tuition program
under section 529(b)(1) of the Internal Revenue
Code of 1986 offered by a State or other
prepaid tuition program offered by a State.
(3) Limitation on bureau authority.--
(A) In general.--Except as provided under
subparagraphs (B) and (C), the Bureau may not
exercise any rulemaking or enforcement
authority with respect to products or services
that relate to any specified plan or
arrangement.
(B) Bureau action pursuant to agency
request.--
(i) Agency request.--The Secretary
and the Secretary of Labor may jointly
issue a written request to the Bureau
regarding implementation of appropriate
consumer protection standards under
this title with respect to the
provision of services relating to any
specified plan or arrangement.
(ii) Agency response.--In response to
a request by the Bureau, the Secretary
and the Secretary of Labor shall
jointly issue a written response, not
later than 90 days after receipt of
such request, to grant or deny the
request of the Bureau regarding
implementation of appropriate consumer
protection standards under this title
with respect to the provision of
services relating to any specified plan
or arrangement.
(iii) Scope of bureau action.--
Subject to a request or response
pursuant to clause (i) or clause (ii)
by the agencies made under this
subparagraph, the Bureau may exercise
rulemaking authority, and may act to
enforce a rule prescribed pursuant to
such request or response, in accordance
with the provisions of this title. A
request or response made by the
Secretary and the Secretary of Labor
under this subparagraph shall describe
the basis for, and scope of,
appropriate consumer protection
standards to be implemented under this
title with respect to the provision of
services relating to any specified plan
or arrangement.
(C) Description of products or services.--To
the extent that a person engaged in providing
products or services relating to any specified
plan or arrangement is subject to any
enumerated consumer law or any law for which
authorities are transferred under subtitle F or
H, subparagraph (A) shall not apply with
respect to that law.
(4) Specified plan or arrangement.--For purposes of
this subsection, the term ``specified plan or
arrangement'' means any plan, account, or arrangement
described in section 220, 223, 401(a), 403(a), 403(b),
408, 408A, 529, 529A, or 530 of the Internal Revenue
Code of 1986, or any employee benefit or compensation
plan or arrangement, including a plan that is subject
to title I of the Employee Retirement Income Security
Act of 1974, or any prepaid tuition program offered by
a State.
(h) Persons Regulated by a State Securities Commission.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of any securities commission (or any agency
or office performing like functions) of any State to
adopt rules, initiate enforcement proceedings, or take
any other action with respect to a person regulated by
any securities commission (or any agency or office
performing like functions) of any State. Except as
permitted in paragraph (2) and subsection (f), the
Bureau shall have no authority to exercise any power to
enforce this title with respect to a person regulated
by any securities commission (or any agency or office
performing like functions) of any State, but only to
the extent that the person acts in such regulated
capacity.
(2) Description of activities.--Paragraph (1) shall
not apply to any person to the extent such person is
engaged in the offering or provision of any consumer
financial product or service, or is otherwise subject
to any enumerated consumer law or any law for which
authorities are transferred under subtitle F or H.
(i) Exclusion for Persons Regulated by the Commission.--
(1) In general.--No provision of this title may be
construed as altering, amending, or affecting the
authority of the Commission to adopt rules, initiate
enforcement proceedings, or take any other action with
respect to a person regulated by the Commission. The
Bureau shall have no authority to exercise any power to
enforce this title with respect to a person regulated
by the Commission.
(2) Consultation and coordination.--Notwithstanding
paragraph (1), the Commission shall consult and
coordinate, where feasible, with the Bureau with
respect to any rule (including any advance notice of
proposed rulemaking) regarding an investment product or
service that is the same type of product as, or that
competes directly with, a consumer financial product or
service that is subject to the jurisdiction of the
Bureau under this title or under any other law. In
carrying out this paragraph, the agencies shall
negotiate an agreement to establish procedures for such
coordination, including procedures for providing
advance notice to the Bureau when the Commission is
initiating a rulemaking.
(j) Exclusion for Persons Regulated by the Commodity Futures
Trading Commission.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of the Commodity Futures Trading Commission
to adopt rules, initiate enforcement proceedings, or
take any other action with respect to a person
regulated by the Commodity Futures Trading Commission.
The Bureau shall have no authority to exercise any
power to enforce this title with respect to a person
regulated by the Commodity Futures Trading Commission.
(2) Consultation and coordination.--Notwithstanding
paragraph (1), the Commodity Futures Trading Commission
shall consult and coordinate with the Bureau with
respect to any rule (including any advance notice of
proposed rulemaking) regarding a product or service
that is the same type of product as, or that competes
directly with, a consumer financial product or service
that is subject to the jurisdiction of the Bureau under
this title or under any other law.
(k) Exclusion for Persons Regulated by the Farm Credit
Administration.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of the Farm Credit Administration to adopt
rules, initiate enforcement proceedings, or take any
other action with respect to a person regulated by the
Farm Credit Administration. The Bureau shall have no
authority to exercise any power to enforce this title
with respect to a person regulated by the Farm Credit
Administration.
(2) Definition.--For purposes of this subsection, the
term ``person regulated by the Farm Credit
Administration'' means any Farm Credit System
institution that is chartered and subject to the
provisions of the Farm Credit Act of 1971 (12 U.S.C.
2001 et seq.).
(l) Exclusion for Activities Relating to Charitable
Contributions.--
(1) In general.--The Director and the Bureau may not
exercise any rulemaking, supervisory, enforcement, or
other authority, including authority to order
penalties, over any activities related to the
solicitation or making of voluntary contributions to a
tax-exempt organization as recognized by the Internal
Revenue Service, by any agent, volunteer, or
representative of such organizations to the extent the
organization, agent, volunteer, or representative
thereof is soliciting or providing advice, information,
education, or instruction to any donor or potential
donor relating to a contribution to the organization.
(2) Limitation.--The exclusion in paragraph (1) does
not apply to other activities not described in
paragraph (1) that are the offering or provision of any
consumer financial product or service, or are otherwise
subject to any enumerated consumer law or any law for
which authorities are transferred under subtitle F or
H.
(m) Insurance.--The Bureau may not define as a financial
product or service, by regulation or otherwise, engaging in the
business of insurance.
(n) Limited Authority of the Bureau.--Notwithstanding
subsections (a) through (h) and (l), a person subject to or
described in one or more of such provisions--
(1) may be a service provider; and
(2) may be subject to requests from, or requirements
imposed by, the Bureau regarding information in order
to carry out the responsibilities and functions of the
Bureau and in accordance with section 1022, 1052, or
1053.
(o) No Authority To Impose Usury Limit.--No provision of this
title shall be construed as conferring authority on the Bureau
to establish a usury limit applicable to an extension of credit
offered or made by a covered person to a consumer, unless
explicitly authorized by law.
(p) Attorney General.--No provision of this title, including
section 1024(c)(1), shall affect the authorities of the
Attorney General under otherwise applicable provisions of law.
(q) Secretary of the Treasury.--No provision of this title
shall affect the authorities of the Secretary, including with
respect to prescribing rules, initiating enforcement
proceedings, or taking other actions with respect to a person
that performs income tax preparation activities for consumers.
(r) Deposit Insurance and Share Insurance.--Nothing in this
title shall affect the authority of the Corporation under the
Federal Deposit Insurance Act or the National Credit Union
Administration Board under the Federal Credit Union Act as to
matters related to deposit insurance and share insurance,
respectively.
(s) Fair Housing Act.--No provision of this title shall be
construed as affecting any authority arising under the Fair
Housing Act.
* * * * * * *
MINORITY VIEWS
H.R. 5082 exempts attorneys and law firms engaged in
litigation from the Fair Debt Collection Practices Act (FDCPA)
and eliminates the Consumer Financial Protection Bureau's
(Consumer Bureau) authority over attorneys and law firms
engaged in debt collection activities. These changes would
allow unscrupulous attorneys, law firms, and their employees to
abuse the FDCPA, and reopen a consumer protection loophole that
Congress previously closed.
In 1977, Congress passed the FDCPA ``to eliminate abusive
debt collection practices by debt collectors, to insure that
those debt collectors who refrain from using abusive debt
collection practices are not competitively disadvantaged, and
to promote consistent State action to protect consumers against
debt collection abuses.''\1\ The FDCPA defines a ``debt
collector'' as a person who ``regularly collects or attempts to
collect, directly or indirectly, [consumer] debts owed or due
or asserted to be owed or due another.'' When the FDCPA was
enacted, attorneys collecting debts on behalf of clients were
exempted from the definition of ``debt collector.'' However, in
1986 Congress reversed course and took the necessary step of
amending the FDCPA to remove the attorney exemption to ``close
a significant loophole.''\2\ Congress found that attorneys were
taking advantage of their exemption to enter the debt
collection industry at a drastic rate, which resulted in
consumers being harmed.\3\ Congress also found that
``attorneys, no less than lay [debt] collectors, can make
errors in cases'' and ``consumers should not be stripped of an
important protection solely because the collector happens to
have a law degree.''\4\
---------------------------------------------------------------------------
\1\15 U.S.C. Sec. 1692.
\2\H.R. Rep. No. 405, 99th Cong. 2d Sess. 3-6, reprinted in 1986
U.S. Code Cong & Ad. News 1752, 1753-57. ``The purpose of the amendment
was . . . to close a significant loophole, whereby attorneys engaging
in traditional debt collection activities were able to avoid the
FDCPA's precepts merely by virtue of the fact that they had, at some
point, obtained a law degree.'' Firemen's Ins. Co v. Keating, 753 F.
Supp. 1137, 1142 (S.D.N.Y. 1990).
\3\Id.
\4\Id.
---------------------------------------------------------------------------
Proponents of H.R. 4082 argue that because attorneys are
regulated by state bar associations, they would already face
consequences if they participated in illegal or unethical
practices. However, H.R. 5082's exemptions extend not only to
attorneys, but to law firms and their employees. Congress is
well aware of what happens when, in spite of state bar
oversight, law firms choose focus on profits and not accuracy
or justice. We only need to look back at the foreclosure mills
that emerged during the 2007-2009 Financial Crisis, with non-
attorney law firm employees ``robo-signing'' and rubber-
stamping banks' foreclosure paperwork, which led to families
being thrown out of their homes. By exempting law firms and
their employees from the definition of a ``debt collector'' in
the FDCPA, this bill would re-open the dangerous loophole that
Congress rightfully closed in 1986.
H.R. 5082 also removes the Consumer Bureau's authority over
law firms and attorneys engaged in debt collection, but the
Consumer Bureau's enforcement actions against debt collection
law firms demonstrate why law firms and attorneys should not be
broadly exempted from the agency's oversight. As mandated by
the Dodd-Frank Wall Street Reform and Consumer Protection Act,
the Consumer Bureau collects and monitors consumer complaints
regarding consumer financial products or services.\5\ Since the
Consumer Bureau began collecting this consumer complaint data,
debt collection has continually topped the list of categories
receiving complaints, with over 250,000 consumers reporting
issues with debt collection to date. The Consumer Bureau has
also advanced several enforcement actions against law firms
engaged in predatory debt collection practices, and secured
millions of dollars in remedies for victims who were affected.
Removing the Consumer Bureau's oversight in this space would
undoubtedly harm the millions of consumers who rely on the
Bureau's enforcement for relief.
---------------------------------------------------------------------------
\5\12 U.S.C. Sec. 5493.
---------------------------------------------------------------------------
For these reasons, we oppose H.R. 5082.
Maxine Waters.
Michael E. Capuano.
Al Green.
Carolyn B. Maloney.
Nydia M. Velazquez.
Gregory W. Meeks.
[all]