[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.
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\1\Obduskey v. McCarthy & Holthus LLP, 586 U.S.__, (2019).
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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\
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\2\Obduskey v. McCarthy & Holthus LLP, 586 U.S.__, (2019).
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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\
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\3\November 13, 2020 letter of support available with House
Financial Services Committee majority staff.
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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]