[Federal Register Volume 59, Number 89 (Tuesday, May 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11233]


[[Page Unknown]]

[Federal Register: May 10, 1994]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

 

Notice of State Application for Exemption From the Provisions of 
the Fair Debt Collection Practices Act

AGENCY: Federal Trade Commission.

ACTION: Invitation to comment on requested exemption from the 
provisions of the Fair Debt Collection Practices Act.

-----------------------------------------------------------------------

SUMMARY: The Commission is hereby publishing a notice that the State of 
Maine has filed an application for exemption from the provisions of the 
Fair Debt Collection Practices Act for various classes of debt 
collection practices in Maine.

DATES: Written comments will be accepted until August 8, 1994.

ADDRESSES: Comments may be filed in person or mailed to: Secretary, 
Federal Trade Commission, 6th & Pennsylvania Avenue NW., Washington DC 
20580. Requests for copies of the application and of the Fair Debt 
Collection Practices Act should be directed to the Federal Trade 
Commission Public Reference Branch, Room 130; telephone (202) 326-2222.

FOR FURTHER INFORMATION CONTACT: John F. LeFevre or Roger J. 
Fitzpatrick, Division of Credit Practices, Bureau of Consumer 
Protection, Federal Trade Commission, Washington, DC 20580; (202) 326-
3224.

SUPPLEMENTARY INFORMATION: The Fair Debt Collection Practices Act, 15 
U.S.C. 1691 et seq. (``Act'' or ``federal Act''), prohibits a number of 
deceptive, unfair and abusive practices by third party debt collectors. 
The Act prohibits debt collectors from using false or misleading 
statements, harassing or abusive conduct or any unfair methods to 
collect debts. Among those things which are specifically prohibited are 
making false threats to coerce payment (such as false threats of suit); 
using deceptive collection notices that falsely appear to be from an 
attorney or a court; and engaging in any sort of harassment, such as 
threatening violence, using profanity and obscenities, or making 
continuous phone calls. The Act also restricts the extent to which debt 
collectors may call a consumer at work, and prohibits them from making 
calls to consumers very early in the morning or late at night. With a 
few narrow exceptions, it prohibits collectors from contacting third 
parties and revealing the existence of a consumer's debt. In addition, 
the Act prohibits collectors from adding charges to a debt unless the 
consumer involved agrees to them or they are permitted by law, and from 
filing suit against a consumer outside of the district (1) of the 
consumer's residence or (2) where the contract creating the debt was 
signed.
    Under the Act, if a consumer disputes the debt in writing, the 
collector is required to stop all collection efforts until the debt is 
verified. The Act also states that if the consumer demands in writing 
that the debt collector cease all further collection efforts, the debt 
collector must comply even if the debt is valid. Finally, the Act gives 
a consumer the right to bring suit against a debt collector in any 
court for violations of the Act and, if successful, receive actual 
damages and additional damages up to $1,000, as well as costs and 
attorney's fees.
    The Act is enforced primarily by the Federal Trade Commission. A 
violation of the Act is deemed an unfair or deceptive practice in 
violation of the Federal Trade Commission Act. All of the functions and 
powers of the Federal Trade Commission Act are available to the 
Commission to enforce compliance by any person with the Act. The 
Commission may enforce the provisions of the Act in federal courts 
seeking civil penalties and injunctive and other relief as appropriate.
    The Act requires that the Commission exempt from its requirements 
any class of debt collection practices within any State if the 
Commission determines under the law of that State that a class of debt 
collection practices is subject to requirements substantially similar 
to those imposed by the Act, and that there is adequate provision for 
enforcement.
    The Commission has promulgated procedures for State application for 
exemption from the provisions of the Act which are published in 16 CFR 
901 et seq. (1992) (``Rule''). Section 901.2 of the Rule provides that 
any State may apply to the Commission for a determination that under 
the laws of that State, any class of debt collection practices within 
that State is subject to requirements that are substantially similar 
to, or provide greater protection for consumers than, those imposed 
under Sections 803 through 812 of the Act and that there is adequate 
provision for State enforcement of such requirements. Section 901.4 of 
the Rule describes the criteria for making the determination. In making 
that determination the Commission primarily will consider each 
provision of the State law in comparison with each corresponding 
provision in Sections 803 through 812 of the Act, and not the Sate law 
as a whole in comparison with the Act as a whole.
    Section 901.3 of the Rule requires that an application be 
accompanied by a variety of documents including (1) the State law; (2) 
a comparison of the provisions of the State law with various sections 
of the Act; (3) a copy of the full text of the law that provides for 
its enforcement; (4) a comparison of the provisions of the law that 
provides for enforcement with the provisions of Section 814 of the Act; 
and (5) a statement identifying the State office designated to 
administer the State law along with a description of the ability of 
that office to effectively administer the statute. If an application is 
filed in accordance with these procedures, Section 901.5 states that 
the filing shall be published in the Federal Register. Section 901.6 
provides that the Commission may grant an exemption under the 
provisions of the Rule.
    On February 25, 1993, the State of Maine Bureau of Consumer Credit 
Protection (``applicant'') filed an application seeking exemption from 
the provisions of the federal Act for various classes of debt 
collection practices in Maine governed by Title 32 of Maine Revised 
Statutes, section 11001 et seq. Maine seeks an exemption for the 
following classes of practices: collection by means of the mails and 
other inter-state and intra-state written communication; collections by 
use of telephone and other electronic means of transmission; in-person 
collection; and repossession or other ``enforcement of security 
interest'' activity.
    On May 27, 1993, applicant filed an addendum to its application of 
February 25, 1993, stating that certain changes had been made to Title 
32 of the Maine Revised Statutes, Section 11002.6. The definition of 
the term ``debt collector'' was broadened to include attorneys whose 
principal activities include collection of debts for clients. 
Subsection 6 was further amended by including within the definition of 
debt collector any person who regularly engaged in the enforcement of 
security interests securing debts, but excluding any person who 
retrieves collateral when a consumer has voluntarily surrendered 
possession. A new Section 11017 authorizes a debt collector to take 
possession of collateral after default under certain conditions.
    Applicant asserts that the provisions of Maine's Fair Debt 
Collection Practices Act (``state Act''), 32 Maine Revised Statutes 
Annotated, Section 11001 et seq., and related statutes are 
substantially similar to, or provide greater protection for consumers 
than, the equivalent provisions of the federal Act, and that the State 
of Maine is able to provide appropriate enforcement of the state Act's 
requirements.

I. Description of Differences Between the Federal Act and State Act and 
Request for Comments on Differences

    As summarized below, applicant compares Sections 803 through 812 of 
the federal Act with comparable sections of the state Act.
    (A) Definitions (Section 803 of the federal Act; Sections 11002, 
11003 and 11012 of the state Act).
    Applicant asserts that (1) most of the definitions in the state Act 
are identical or substantially similar to those in the federal Act; (2) 
other terms are comparable given the different levels of jurisdiction 
involved (e.g., the federal Act's definition of ``Commission'' and the 
state Act's definition of ``Superintendent'' each define the 
responsible authority); and (3) other differences are not substantive.
    The differences between the two statutes are as follows:
    1. Applicant explains that the defining phrase set out in Section 
11002.2, ``conducting business within this State,'' limits its scope to 
the activities of any debt collectors who: (1) Are located in Maine, or 
(2) solicit business and then collect debts or repossess collateral in 
Maine, regardless of the collector's location. This application seeks 
exemption of only those practices of debt collectors conducting 
business within Maine, and the activities of debt collectors who have 
voluntarily subjected themselves to Maine law by obtaining a debt 
collector's license from Maine.
    Public comment is sought as to whether the definition of 
``conducting business within this State'' set out in Section 11002.2 of 
the state Act affects the level of protection afforded by the state Act 
as compared to the protection afforded by the federal Act.
    2. Section 11002.6 of the state Act includes within the definition 
of debt collector ``persons who furnish collection systems carrying a 
name which simulates the name of the debt collector and who supply 
forms or form letters to be used by the creditor even though the forms 
direct the debtor to make payments directly to the creditor.''
    Public comment is sought as to whether the above included provision 
in the definition of debt collector affects the level of protection 
afforded by the state Act as compared to the protection afforded by the 
federal Act.
    3. Section 11003.8 of the state Act excludes from the definition of 
``debt collector'' collection activities that are confined to and 
directly related to the operation of a business other than that of a 
debt collector, such as, but not limited to, financial institutions 
regulated under Maine Revised Statutes Annotated, Title 9-B, Maine 
Banking Code.\1\ Applicant believes that this section of the state Act 
is non-substantive. Section 803(6) of the federal Act does not contain 
this exclusion.
---------------------------------------------------------------------------

    \1\Applicant points out that the drafters of the Maine law chose 
to place the ``exclusions'' as a separate section, as opposed to 
itemizing those within the definition of debt collector.
---------------------------------------------------------------------------

    Public comment is sought as to whether the exclusion of certain 
businesses, including financial institutions, among others, in Section 
11003.8 of the state Act affects the level of protection afforded by 
the state Act as compared to the protection afforded by Section 803(6) 
of the federal Act.
    4. Section 11002.6 of the state Act includes within the definition 
of debt collector ``any attorney-at-law whose principal activities 
include collection debts as an attorney on behalf of and in the name of 
clients.''\2\
---------------------------------------------------------------------------

    \2\Section 11003.6 of the state Act, which previously excluded 
attorneys from the definition of debt collector, was repealed 
following Maine's request for exemption dated February 25, 1993. 
Maine submitted an addendum to its application dated May 27, 1993, 
wherein its exemption request was modified to reflect the inclusion 
of attorneys within the state Act, as amended. (Maine Public Law 
126, May 18, 1993).
---------------------------------------------------------------------------

    Section 803(6) of the federal Act defines debt collector 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.''\3\
---------------------------------------------------------------------------

    \3\The federal Act's definition of ``debt collector'' was 
amended in 1985 to repeal the attorney at law exemption previously 
set out in former Section 803(6)(F). An attorney is now a debt 
collector under the federal Act, as amended, if the attorney's 
efforts regularly to collect consumer debts on behalf of clients 
include activities traditionally associated with debt collection, 
such as sending demand letters (dunning notices) or making 
collection telephone calls to consumers. See Commentary on the Fair 
Debt Collection Practices Act, 53 FR 50097, 50102 (1988).
---------------------------------------------------------------------------

    Public comment is sought as to whether the inclusion of attorneys-
at-law as debt collectors in Section 11002.6 of the state Act affects 
the level of protection afforded by the state Act as compared to the 
protection afforded by Section 803(6) of the federal Act.
    5. Section 11002.6 of the state Act, as amended,\4\ includes within 
its definition of debt collector any person regularly engaged in the 
enforcement of security interests securing debts. Persons who had 
engaged in the enforcement of security interests more than five times 
in the previous calendar year would be covered. If a person does not 
meet those numerical standards for the previous calendar year, the 
numerical standards are to be applied to the current calendar year. The 
term does not include any person who retrieves collateral when a 
consumer has voluntarily surrendered possession.
---------------------------------------------------------------------------

    \4\Section 11002.6 was recently amended by the State of Maine. 
See Maine Public Law 126, May 18, 1993.
---------------------------------------------------------------------------

    The federal Act's definition of debt collector in Section 803(6) 
``includes any person * * * in any business the principal purpose of 
which is the enforcement of security interests.''
    Public comment is sought as to whether the difference in coverage 
between Section 11002.6 of the state Act and Section 803(6) of the 
federal Act affects the level of protection afforded by the state Act 
as compared to the federal Act.
    6. Section 11017 of the state Act\5\ provides that a debt collector 
acting on behalf of a creditor may take possession of collateral only 
if possession can be obtained without entry into a dwelling, unless 
that entry has been authorized after default and without the use of 
force or other breach of the peace. A debt collector must take 
inventory of any unsecured property acquired along with the repossessed 
collateral and immediately notify the consumer that the property will 
be made available in a manner convenient to the consumer. There is no 
comparable provision in the federal Act.
---------------------------------------------------------------------------

    \5\This section was recently enacted by the state of Maine in 
the same statute that included attorneys within the definition of 
debt collector. Although it is in a section separate from Section 
11002 of the state Act, it deals with a debt collector's rights and 
obligations when repossessing property for creditors.
---------------------------------------------------------------------------

    Public comment is sought as to whether the difference in coverage 
between the state Act and the federal Act affects the level of 
protection afforded by the state Act as compared to the federal Act.
    (b) Acquisition of location information (Section 804 of the federal 
Act; Section 11011 of the state Act).
    Applicant asserts that the state Act is virtually identical to its 
federal counterpart and therefore meets the substantially similar test 
set out in Section 901.2 of the Rule.
    (C) Communications in connection with debt collection (Section 805 
of the federal Act; Section 11012 of the state Act).
    Applicant asserts that, with the exception of non-substantive 
stylistic language differences and differing references to the 
appropriate respective state or federal related provisions, the two 
sections are virtually identical and therefore are substantially 
similar as required under Section 901.2 of the Rule.
    (D) Harassment or abuse, false and misleading representations and 
unfair practices (Sections 806, 807, and 808 of the federal Act; 
Sections 11013.1, .2 and .3 of the state Act).
    1. Section 11013.1.C of the state Act prohibits publication of a 
list of consumers who allegedly refuse to pay debts, except to a 
consumer reporting agency or to persons meeting the requirements of 
Title 10, Chapter 210 of the Maine statutes, which is the Maine Fair 
Credit Reporting Act.
    The language of the state Act and the federal Act is identical 
except for the differing references to the federal Fair Credit 
Reporting Act and the state Fair Credit Reporting Act.
    Public comment is sought as to whether reference to the Maine Fair 
Credit Reporting Act, in lieu of reference to the federal Fair Credit 
Reporting Act, affects the level of protection afforded by the state 
Act as compared to the federal Act.
    2. Applicant states that Section 806 of the federal Act and Section 
11013.1 of the state Act both deal with harassment and abuse and 
contain identical language. In addition, Section 11013.1.G of the state 
Act includes prohibitions against use of ``shame cards'', ``shame 
automobiles'' and similar devices, and these additions arguably provide 
greater protection to consumers.
    Public comment is sought as to whether the reference to ``shame 
cards'', ``shame automobiles'' or similar devices in Section 11013.1.G 
of the state Act affects the level of protection afforded by the state 
Act as compared to the federal Act.
    3. Applicant states that Section 807 of the federal Act and Section 
11013.2 of the state Act dealing with false or misleading 
representations are virtually identical and the state Act therefore is 
substantially similar to the federal Act as required by Section 901.2 
of the Rule.
    4. Section 11013.2.F(2) of the state Act prohibits the false 
representation that a sale, referral or other transfer of any interest 
in a debt shall cause the consumer to become subject to any practices 
prohibited by the state Act or Title 9-A, the Maine Consumer Credit 
Code.
    Public comment is sought as to whether the reference to Title 9-A 
of the Maine Consumer Credit Code in Section 11013.2.F(2) affects the 
level of protection afforded by the state Act as compared to the 
federal Act.
    5. Section 11013.2.P of the state Act prohibits the false 
representation or implication that a debt collector operates or is 
employed by a consumer reporting agency, as defined by Title 10, 
Section 1312, subsection 4 of the Maine Fair Credit Reporting Act.
    Public comment is sought as to whether the reference to Title 10, 
Section 1312, subsection 4, of the Maine Fair Credit Reporting Act 
affects the level of protection afforded by the state Act as compared 
to federal Act.
    6. Applicant asserts that comparison of Section 808 of the federal 
Act and Section 11013.3 of the state Act, dealing with unfair 
practices, reveals that the state Act prohibits the same practices as 
the federal Act, as well as several additional unfair practices.
    The added unfair practices (subsections 11013.3. I through N) 
include use of notaries or public officials authorized to serve legal 
papers to collect debts; employing the services of an attorney unless 
this is specifically authorized by the creditor in writing and none of 
the lawyer's fees will be sought or received by the collector; failing 
to return claims to the creditor, failing to account to a client for 
monies collected, and failing to return valuable papers to the 
creditor; commingling collector and creditor funds; use of creditor's 
money in collection of debts; soliciting loans to pay a debt or 
recommending persons as a source of funds to pay a debt; and 
threatening to bring legal action in the collector's own name or 
instituting suits on behalf of others or furnishing legal advice.
    Thus, applicant asserts that the state Act is substantially similar 
to the federal Act, as required by Section 901.2 of the Rule, and 
arguably provides greater protection than the federal Act with the 
addition of the several added unfair practices.
    Public comment is sought as to whether the additional designated 
unfair practices contained in subsections 11013.3. I through N affect 
the level of protection afforded by the state Act as compared to the 
federal Act.
    7. Section 11013.4 of the state Act provides that a debt collector 
may not report solely in its own name any credit or debt information to 
a consumer reporting agency as defined by Title 10, Section 1312, 
subsection 4. The applicant asserts that this additional requirement 
provides clarification to consumers regarding their credit reports by 
requiring that debt collectors report debts using the names of the 
original creditors.
    Public comment is sought as to whether the additional requirement 
in Section 11013.4 of the state Act affects the level of protection 
afforded by the state Act as compared to the federal Act.
    (E) Validation of Debts and Multiple Debts (Sections 809 and 810 of 
the federal Acts; Sections 11014 and 11015 of the state Act).
    Applicant states that the Maine provisions are virtually identical 
to the federal Act and therefore are substantially similar as required 
by Section 901.2 of the Rule.
    (F) Legal actions by debt collectors (Section 811 of the federal 
Act).
    Applicant states that since the state Act prohibits debt collectors 
from filing lawsuits (Section 11013.3.N), no provisions relating to 
venue are set out in the Maine law because they are not needed. 
Applicant asserts, therefore, that the lack of a state equivalent to 
Section 811 of the federal Act (restricting venue in suits brought by 
collectors) does not result in a diminution of protection afforded 
Maine consumers.
    Public comment is sought as to whether the absence of a venue 
provision in the state act affects the level of protection afforded by 
the state Act as compared to the federal Act.
    (G) Furnishing certain deceptive forms (Section 812 of the federal 
Act; Section 11016 of the state Act).
    Applicant asserts that since the language of both sections is 
virtually identical, the state Act is substantially similar to its 
federal counterpart as required by Section 901.2 of the Rule.
    Applicant also asserts that in all of the above discussed Maine 
statutory provisions, except as noted: (1) each of the provisions of 
the state Act is either identical or substantially similar to Sections 
803 through 812 of the federal Act as prescribed by Section 901.2 of 
the Rule; and (2) no other state laws, including administrative or 
judicial interpretations, are related to or would have a diminishing 
effect upon the effectiveness of the state Act.

II. Comparison of Provisions for Enforcement Between Federal Act and 
State Act

    As summarized below, applicant compares Sections 813 and 814 of the 
federal Act to the state Act.
    (A) Civil liability (Section 813 of the federal Act; Section 11054 
of the state Act).
    Applicant states that Section 11054 of the state Act, titled 
``Civil liability,'' is identical to those provisions of Section 813 of 
the federal Act. The state Act establishes private causes of action for 
aggrieved consumers, while at the same time protecting debt collectors 
who pattern their activities in conformance with advisory rulings of 
the state administrator. Remedies under the state Act are identical to 
those set forth in the federal Act. The one year limitation of action 
found in the federal Act is mirrored in Section 11054.4 of the state 
Act.
    (B) Administrative enforcement (Section 814 of the federal Act; 
Sections 11040, 11051, 11053 and Subchapter III of the state Act, 
Licensing and Administration).
    1. Applicant states that much of the regulatory authority of 
Maine's Bureau of Consumer Credit Protection, the relevant state 
agency, is derived from the licensing powers granted in the state Act. 
To the extent that the state agency is held responsible not only for 
the initial licensing, bonding and safety and soundness of collection 
companies, but also for the subsequent management of debt collectors if 
they become financially unsound, the state Act arguably provides 
greater protection to consumers than the general enforcement provisions 
of Section 814 of the federal Act, since the federal Act does not 
provide licensing authority. Additionally, state law specifically 
provides for the investigation of practices and examination of records 
of collectors by state examiners. State law also permits assessing 
charges for expenses incurred pursuant to these examinations.
    Public comment is sought as to whether the provisions for licensing 
and administration in Subchapter III of the state Act affect the level 
of protection afforded by that Act as compared to the federal Act.
    2. Sections 11051 and 11040 of the state Act provide for license 
revoking authority and criminal penalties for operation without a debt 
collector's license. The federal Act grants no licensing authority to 
the Commission.
    Section 11053 of the state Act authorizes the Superintendent for 
Consumer Credit Protection, acting through the Attorney General of 
Maine, to bring an action for civil penalties, not to exceed $5,000, 
against any person who willfully violates the state Act. No civil 
penalty pursuant to the state Act may be imposed for violations of the 
state Act occurring more than 2 years before the civil action is 
brought.
    Section 814 of the federal Act authorizes the Commission to 
exercise all its functions and powers under the Federal Trade 
Commission Act, 15 U.S.C. et seq., to enforce the federal Act. A 
violation of the federal Act constitutes an unfair or deceptive act or 
practice in violation of the Federal Trade Commission Act. The Federal 
Trade Commission Act authorizes a civil penalty of up to $10,000 for 
each violation of the federal Act done with actual or implied knowledge 
of that Act. 15 U.C.S. 45(m)(1)(A). Additionally, the Commission is 
empowered to seek injunctive relief, as appropriate. 15 U.S.C. 53(b).
    No remedy under the Federal Trade Commission Act is available for 
violations occurring more than 5 years before the civil action is 
brought. 28 U.S.C. 2462.
    Public comment is sought as to the level of protection afforded by 
the enforcement authority granted by Sections 11051, 11053 and 11040 of 
the state Act as compared to that in the federal Act.

III. Information Regarding the Bureau of Consumer Credit Protection and 
Its Ability To Administer Maine's Debt Collection Laws

    Applicant states that Maine's Bureau of Consumer Credit Protection 
enforces the state Act as well as Maine's Fair Credit Reporting Act. 
The Bureau includes an office staff of ten individuals, plus five 
examiners in the field. It conducts reviews of collection agency 
practices through a staff of examiners and it licenses collection 
agencies. It also requires bonding of collection agencies and reviews 
of the financial posture of collection firms applying for licenses. 
Staff members are trained to handle consumer complaints and questions 
from consumers concerning debt collection activities; thousands of 
educational consumer brochures are distributed. A Bureau newsletter 
distributed within Maine and throughout New England chronicles license 
and enforcement actions.
    The agency receives funding through licensing fees, examination 
reimbursement costs, and other assessments that, when combined, make up 
approximately $100,000 of the agency's $800,000 total budget.
    Public comment is sought as to whether the Maine Bureau of Consumer 
Credit Protection's ability to administer the state Act affects the 
level of protection afforded by the state Act as compared to the 
federal Act.

    By Direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 94-11233 Filed 5-9-94; 8:45 am]
BILLING CODE 6750-01-M