Yesterday, Oregon HB 2356, a debt buyer bill introduced by Oregon Attorney General Ellen Rosenblum, passed in the Senate after having passed the House a week earlier. RMA anticipates that this bill will be signed into law by Governor Kate Brown.

This will be a highly complex law that needs the careful review of all debt buying companies and collection agencies that maintain Oregon accounts in their portfolios. It is important to note that the bill’s provisions are retroactive with the exception of certain data and document requirements which only apply to debt purchased or sold on or after January 1, 2018.

Definitions

The bill in ORS 646.639(1)(g) defines “debt buyer” as an entity that “regularly engages in the business of purchasing charged-off debt for the purpose of collecting the charged-off debt or hiring another person to collect or bring legal action to collect the charged-off debt.”

Extra attention needs to be paid by third-party debt collectors in interpreting the extent to which the bill applies to their operations. The existing definition of “debt collector” in ORS 646.639(1)(h) is amended to cover an entity that “collects or attempts to collect a debt owed, or alleged to be owed, to a creditor or debt buyer” (emphasis added). Additionally, a provision in the bill specifically states that a “debt collector acting on behalf of a debt buyer engages in an unlawful collection practice if the debt buyer or debt collector” engages in specific enumerated conduct (emphasis added). These provisions would suggest the bill is intended to apply to third-party debt collectors when collecting debt owed to a debt buying company.

However, in the same section of the bill, there is language which would appear to contradict the aforementioned provisions by stating “a debt collector is not acting on a debt buyer’s behalf, and is not subject to the duties to which a debt buyer is subject under this section and section 1 of this 2017 Act, if the debt collector collects or attempts to collect a debt on behalf of an owner that retains a direct interest in the debt . . .” (emphasis added). Since debt buyers, by the very nature of their business model, “own” the debt and retain a “direct interest” in debt transferred to a third-party debt collector, it is not clear the intent of this language and how it might impact the responsibilities of third-party debt collectors when collecting on behalf of debt buyers.

Pleading Requirements

A debt buyer, or a debt collector working on the debt buyer’s behalf, must include the following in the initial pleadings when seeking court action on a debt:

  • The original creditor’s name, written as the original creditor used the name in dealings with the debtor;
  • The name, address, and telephone number of the person that owns the debt and a statement as to whether the person is a debt buyer;
  • The last four digits of the original creditor’s account number for the debt;
  • The date on which the debt buyer purchased the debt;
  • A detailed and itemized statement that shows:
    • The amount the debtor last paid on the debt, if the debtor made a payment, and the date of the payment;
    • The amount and date of the debtor’s last payment on the debt before the debtor defaulted or before the debt became charged-off debt, if the debtor made a payment;
    • The balance due on the debt on the date on which the debt became charged-off debt;
    • The amount and rate of interest, any fees, and any charges that the original creditor imposed, if the debt buyer or debt collector knows the amount, rate, fee or charge;
    • The amount and rate of interest, any fees, and any charges that the debt buyer or any previous owner of the debt imposed, if the debt buyer or debt collector knows the amount, rate, fee, or charge;
    • The attorney fees the debt buyer or debt collector seeks, if the debt buyer or debt collector expects to recover attorney fees; and
    • Any other fee, cost, or charge the debt buyer seeks to recover.

Unlawful Collection Practices

A debt buyer, or debt collector acting on behalf of a debt buyer, engages in an unlawful collection practice if the debt buyer or debt collector:

  • Collects or attempts to collect a debt before providing, in response to a debtor’s request, the following documents that establishes the nature and the amount of the debt:
    • The information provided in the initial pleadings (see above);
    • The name and address of the debtor;
    • Evidence that the debt buyer and only the debt buyer owns the debt;
    • The date on which the debt buyer purchased the debt; and
    • A copy of the agreement between the original creditor and the debtor that is either:
      • The contract or other writing the debtor signed that created and is evidence of the original debt; or
      • A copy of the most recent monthly statement that shows a purchase transaction or balance transfer or the debtor’s last payment, if the debtor made a payment, if the debt is a credit card debt or other debt for which a contract or other writing that is evidence of the debt does not exist;

[NOTE: A debt buyer, or debt collector acting on behalf of a debt buyer, must provide to a debtor all of these documents within 30 days after receiving a request for information about the debt from the debtor. While this provision appears in the pleadings section of the bill, it is not clear whether its applicability only relates to pleadings.]

  • Fails to provide to a debtor, after the debt buyer or debt collector receives payment in cash or the debtor requests the receipt, a receipt that contains specific content;
  • Files legal action against a debtor or files legal action to attempt to collect a debt if the debt buyer or debt collector knows or after exercising reasonable diligence would know that an applicable statute of limitations “bars the legal action to collect or the legal action to attempt to collect the debt;” and
  • Brings a legal action against a debtor to collect a debt without possessing records that satisfy the business records exemption to the rules of evidence (or that are a record of a foreign judgment) that establishes the nature and the amount of the debt (see above).

The following are new unlawful collection practices which apply to debt collectors:

  • Collects or attempts to collect interest or other charges or fees that exceed the actual debt unless the agreement, contract or instrument that creates the debt expressly authorizes, or a law expressly allows, the interest or other charges or fees;
  • Collects or attempts to collect any debt that the debt collector knows, or after exercising reasonable diligence would know, arises from medical expenses that qualify for reimbursement under the Oregon Health Plan or under Medicaid;
  • Files a legal action to collect or files a legal action to attempt to collect a debt if the debt collector knows, or after exercising reasonable diligence would know, that an applicable statute of limitations bars the collection or the collection attempt;
  • Knowingly collects any amount, including any interest fee, charge, or expense incidental to the principal obligation, unless the amount is expressly authorized by the agreement creating the debt or permitted by law; and
  • Collects or attempts to collect a debt before providing to a debtor, within 30 days after the date of the debtor’s request, all of the documents listed in subsection (4)(b) of this section.

Licensure

This bill introduces the first stand-alone licensure requirement for debt buyers in the nation. In most states that license debt collection activity, debt buyers are generally considered “debt collectors” or “collection agencies” for the purpose of licensing. Debt buyers are not considered debt collectors or collection agencies under existing law and as clarified in this bill. Since the two collection models were not merged, there may be a number of issues that develop, including:

  • Will debt buyers that maintain different corporate entities for purchase and collection need to maintain different licenses for each entity and how they will reconcile the different requirements that will now exist between their licensed collection agencies and their licensed debt buyers;
  • Will third-party collection agencies that have also purchased debt under a single corporate entity need to be licensed as both a collection agency and a debt buyer; and
  • Will the state of Oregon be able to provide affordable licensing fees for the debt buyer license given the smaller pool of applicants?

RMA strongly recommends that its members share this member alert with any debt buyer, collection agency, and law firm it transacts business with as well as those internally responsible for compliance, purchase/sale, and legal operations.