[House Report 116-638]
[From the U.S. Government Publishing Office]


116th Congress }                                          { Report
                        HOUSE OF REPRESENTATIVES
  2d Session   }                                          { 116-638

======================================================================
 
       NON-JUDICIAL FORECLOSURE DEBT COLLECTION CLARIFICATION ACT

                                _______
                                

 December 10, 2020.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Ms. Waters, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 5001]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 5001) to amend the Fair Debt Collection 
Practices Act to clarify that the definition of a debt 
collector includes, in all cases, a person in a business the 
principal purpose of which is the enforcement of security 
interests, having considered the same, reports favorably 
thereon with an amendment and recommends that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Section-by-Section Analysis......................................     3
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     3
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     5
Statement of Performance Goals and Objectives....................     5
New Budget Authority and CBO Cost Estimate.......................     5
Committee Cost Estimate..........................................     7
Unfunded Mandate Statement.......................................     7
Advisory Committee...............................................     7
Application of Law to the Legislative Branch.....................     7
Earmark Statement................................................     7
Duplication of Federal Programs..................................     8
Changes to Existing Law..........................................     8

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Non-Judicial Foreclosure Debt 
Collection Clarification Act''.

SEC. 2. ENFORCEMENT OF SECURITY INTERESTS.

   Section 803(6) of the Fair Debt Collection Practices Act (15 U.S.C. 
1692a(6)) is amended by striking ``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.''.

                          Purpose and Summary

    On November 8, 2019, Congressman William Lacy Clay 
introduced H.R. 5001, the ``Non-Judicial Foreclosure Debt 
Collection Clarification Act,'' which would reverse the recent 
Supreme Court decision in Obduskey v. McCarthy and Holthus 
LLP\1\ by amending the Fair Debt Collection Practices Act 
(``FDCPA'') to clarify that entities in non-judicial 
foreclosure proceedings are covered by the law.
---------------------------------------------------------------------------
    \1\Obduskey v. McCarthy & Holthus LLP, 586 U.S.__, (2019).
---------------------------------------------------------------------------

                  Background and Need for Legislation

    In March 2019, the Supreme Court held in Obduskey v. 
McCarthy & Holthus LLP that businesses engaged in non-judicial 
foreclosure do not qualify as debt collectors under the FDCPA. 
In that case, a homeowner in Colorado, which is a non-judicial 
foreclosure state, went through foreclosure proceedings, but 
the mortgage servicer's law firm refused to follow the FDCPA as 
it disputed that it was covered as a ``debt collector'' under 
the FDCPA. In its decision, although the Supreme Court 
acknowledged that non-judicial foreclosure would otherwise fit 
within the law's primary definition of ``debt collector,'' it 
held that the secondary definition of ``debt collector,'' which 
applies to the collection of a security interest, suggested 
that Congress intended for non-judicial foreclosure to be 
excluded from the broader definition.\2\
---------------------------------------------------------------------------
    \2\Obduskey v. McCarthy & Holthus LLP, 586 U.S.__, (2019).
---------------------------------------------------------------------------
    However, in a concurrence, Justice Sotomayor noted that it 
was ``too close a case for [her] to feel certain that Congress 
recognized that this complex statute would be interpreted the 
way that the Court does today'' and that Congress could clarify 
the statute if the Court got it wrong. Justice Sotomayor also 
highlighted the majority's acknowledgement that nothing in the 
Court's opinion ``suggest[s] that pursuing nonjudicial 
foreclosure is a license to engage in abusive debt collection 
practices like repetitive nighttime phone calls; enforcing a 
security interest does not grant an actor blanket immunity from 
the Act.''
    This legislation would clarify the FDCPA to clearly state 
that parties bringing proceedings against consumers in non-
judicial foreclosure are covered by FDCPA as debt collectors. 
This legislation is supported by over twenty consumer, civil 
rights, labor, and community organizations, including Americans 
for Financial Reform, Consumer Federation of America, NAACP, 
National Association of Consumer Advocates, National Consumer 
Law Center, and Public Citizen.\3\
---------------------------------------------------------------------------
    \3\November 13, 2020 letter of support available with House 
Financial Services Committee majority staff.
---------------------------------------------------------------------------

                      Section-by-Section Analysis


Section 1. Short title

    This section provides that H.R. 5001 may be cited as the 
``Non-Judicial Foreclosure Debt Collection Clarification Act.''

Section 2. Enforcers of security interests

    This section amends Section 803(6) of the Fair Debt 
Collection Practices Act (15 U.S.C. 1692a(6)) by clarifying the 
definition of ``debt collector'' to not include ``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.''

                                Hearings

    For the purposes of section 103(i) of H. Res. 6 for the 
116th Congress on September 26, 2019, the Committee on 
Financial Services held a hearing entitled, ``Examining 
Legislation to Protect Consumers and Small Business Owners from 
Abusive Debt Collection Practices'' to consider a discussion 
draft of H.R. 5001. Testifying before the Committee were the 
Honorable Rohit Chopra, Commissioner, Federal Trade Commission, 
Rev. Dr. Cassandra Gould, Pastor, Quinn Chapel A.M.E. Church 
(Jefferson City, MO) 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.

                  Committee Votes and Roll Call Votes

    The Committee on Financial Services met in open session on 
November 13, 2019, and ordered H.R. 5001 to be reported 
favorably to the House as amended in the nature of a substitute 
by a recorded vote of 31 yeas and 23 nays, a quorum being 
present.

                  Committee Votes and Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 5001:


  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goals of H.R. 5001 are to ensure 
that government employees, contractors, and other consumers 
affected by a Federal government shutdown.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 5001 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 22, 2020.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5001, the Non-
Judicial Foreclosure Debt Collection Clarification Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is David Hughes.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    H.R. 5001 would classify some businesses engaged in 
nonjudicial foreclosure proceedings as debt collectors under 
the Fair Debt Collection Practices Act (FDCPA). (Nonjudicial 
proceedings allow foreclosures on delinquent mortgages to occur 
without court supervision.) By classifying such businesses as 
debt collectors, H.R. 5001 would require them to comply with 
all applicable provisions of the FDCPA.
    The Federal Trade Commission (FTC) is primarily responsible 
for enforcing violations of the FDCPA. Using information from 
the FTC, CBO estimates that the agency would spend less than 
$500,000 over the 2020-2025 period to enforce additional 
violations under the amended statute; such spending would be 
subject to the availability of appropriated funds.
    The Consumer Financial Protection Bureau (CFPB) is 
authorized to implement the FDCPA through regulation. Using 
information from the CFPB, CBO estimates that it would cost the 
bureau less than $500,000 to update FDCPA regulations. The CFPB 
has permanent authority, not subject to annual appropriation, 
to spend amounts transferred from the Federal Reserve.
    The bill would impose private-sector and intergovernmental 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
CBO cannot determine whether the cost of the private-sector 
mandates would exceed the threshold established in UMRA ($168 
million in 2020, adjusted annually for inflation). CBO 
estimates the cost to comply with the intergovernmental 
mandates would not exceed the threshold established in UMRA 
($84 million in 2020, adjusted annually for inflation).
    Under the FDCPA, a debt collector is prohibited from 
communicating with third parties about a debt without the 
consumer's approval and cannot communicate with a consumer who 
has requested not to be contacted. In addition, under the 
FDCPA, a debt collector cannot act to collect a debt that is in 
dispute without providing the consumer with verification of 
that debt. Applying those restrictions to nonjudicial 
foreclosures could slow the foreclosure process while the debt 
collector provides information requested by the consumer.
    The restrictions would impose costs on the new debt 
collectors, including expenses to comply with the new 
disclosure requirements and revenues lost from the delay in the 
nonjudicial foreclosure process. Little data is available to 
estimate the number of newly classified debt collectors or the 
number of consumers who would make claims that would slow the 
nonjudicial foreclosure process; therefore, CBO cannot estimate 
the cost of the mandate. However, given the number of loans 
that might be affected, CBO expects the costs could be 
substantial.
    Because the FDCPA preempts state laws that conflict with 
its provisions, any amendments that would broaden the scope of 
FDCPA also would preempt state law. Thus the reclassification 
would preempt laws in roughly 30 states and the District of 
Columbia that govern businesses involved in nonjudicial 
foreclosures. Although the preemption would limit the 
application of those laws, it would impose no duty on states 
that would result in additional spending or a loss of revenue.
    The CBO staff contacts for this estimate are David Hughes 
(for federal costs) and Rachel Austin (for mandates). The 
estimate was reviewed by H. Samuel Papenfuss, Deputy Director 
of Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 5001. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act, which is 
attached.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended The Committee adopts as its 
own the estimate of federal mandates regarding H.R. 5001, as 
amended, prepared by the Director of the Congressional Budget 
Office.

                           Advisory Committee

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1 H.R. 5001, as amended, 
does not apply to terms and conditions of employment or to 
access to public services or accommodations within the 
legislative branch.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 5001 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 5001 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                        Changes to Existing Law

    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, H.R. 5001, as reported, are shown as follows:

         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 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 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.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    Committee Republicans believe that consumers should have 
certainty and transparency with respect to mortgage 
foreclosures. However, H.R. 5001 will disrupt existing state 
laws implementing nonjudicial foreclosures. The bill would 
amend the Fair Debt Collection Practices Act (FDCPA) to include 
businesses that enforce a security interest as a primary debt 
collector.
    Earlier this year, the Supreme Court in Obduskey v. 
McCarthy & Holthus LLP held in a 9-0 decision that businesses 
following a state's foreclosure proceedings statute are not 
``debt collectors'' under the FDCPA, except for limited 
purposes articulated in the statute. In upholding Congress' 
intent with respect to a primary debt collector, the Supreme 
Court observed that the exclusion of enforcing a security 
interest from the definition was intentional, understanding 
that states are better positioned to implement nonjudicial 
foreclosures.
    Thirty-one states and the District of Columbia have enacted 
nonjudicial foreclosure statutes. These statutes serve the 
purpose of protecting consumers while also reducing unnecessary 
litigation, thereby decreasing overall mortgage costs. 
Additionally, the Court recognized extending the FDCPA to cover 
nonjudicial foreclosures would result in foreclosure sale 
advertisements being prohibited. This has the potential to 
depress bidding for a distressed property and harm debtors if 
the sale does not cover the full amount of the debt.
    Committee Republicans recognize the need to protect 
consumers from harmful debt collection practices but continue 
to oppose this bill. Specifically, committee Republicans are 
concerned by the lack of available data demonstrating the need 
for this legislation. The FDCPA and in particular the 
definition of a debt collector has been in place for more than 
40 years. States continue to be well-positioned to protect 
consumers with respect to mortgages and non-judicial 
foreclosure process.
                                   Alexander X. Mooney.
                                   David Kustoff.
                                   Lance Gooden.
                                   William R. Timmons IV.
                                   Ted Budd.
                                   J. French Hill.
                                   John W. Rose.
                                   Anthony Gonzalez.
                                   Andy Barr.
                                   Ann Wagner.
                                   Blaine Luetkemeyer.
                                   Steve Stivers.
                                   Patrick T. McHenry.
                                   Warren Davidson.
                                   Barry Loudermilk.
                                   Tom Emmer.
                                   Scott R. Tipton.
                                   Roger Williams.
                                   Bryan Steil.
                                   Trey Hollingsworth.
                                   Denver Riggleman.
                                   Lee M. Zeldin.
                                   Frank D. Lucas.
                                   Bill Huizenga.
                                   Bill Posey.

                                  [all]