Eldridge’s bill addresses predatory and deceptive practices of the debt collection industry in the Commonwealth
BOSTON – On September 25th, the Massachusetts Legislature’s Joint Committee on Financial Services heard testimony on S.120, the Debt Collection Fairness Act, which would safeguard borrowers against debt collector harassment, and empower consumers to repay debt and take more control over their economic security.
“The debt collector industry is rampant with abusive practices that undermine the economic security of our most vulnerable populations, especially senior citizens, individuals with disabilities, and the poor,” said Senator Jamie Eldridge (D-Acton), the bill’s lead Senate sponsor and Chair of the Financial Services Committee. “The consumer protections contained in this bill are crucial to assisting Massachusetts residents to pay-off outstanding debt while maintaining their dignity and autonomy, and I will continue to work with the Attorney General and advocates across the state to ensure its passage.”
“Too often debt collectors harass consumers and clog our court system by demanding money they have no right to collect and on the basis of debts they cannot prove,” said Attorney General Maura Healey. “Passing the Debt Collection Fairness Act will protect Massachusetts families from exploitation and stop the abuse of our courts. I thank Sen. Eldridge for his continued commitment to ending these deceptive practices.”
In 2014, the Urban Institute reported that nearly one in four Massachusetts residents with credit reports had a debt in collection due to non-payment of a bill and that the average debt amount was $4,602. Between 2004 and 2013, 1.2 million lawsuits were filed in small claims and district courts by professional debt collectors.
“The 23% of Massachusetts residents with debt in collections need a path to financially recover without fraudulent lawsuits, snowballing fees, and threats of detainment,” said Margaret Miley, former Executive Director of the Midas Collaborative. “Most people assume that they would already have these protections in a modern economic system.”
The bill addresses these issues with three major provisions: garnishments; statute of limitations for debt collection; and capias warrants.
Massachusetts currently permits garnishment of any earnings over $28,600 per year. This bill would raise this threshold to 90 times the minimum wage or $51,480 with a 10 percent cap on earnings over that amount.
The statute of limitations for debt collection is six years. However, a payment by the debtor of any size revives the statute of limitations, allowing claims for another six years after the most recent payment. The bill reduces the statute of limitations for debt collection from six years to four years, prohibits reviving the statute of limitations period due to partial payment, and decreases the period of time during which the creditor can collect on a court judgment from 20 years to five years for all consumer debts.
Capias warrants are often abused by debt collectors to pressure a debtor into making a payment. A capias warrant is an order to arrest and detain an individual for the purposes of guaranteeing a court appearance. Debt collectors use this threat of arrest to force debtors to make payments. This bill prohibits the use of capias warrants in such proceedings. Instead, a plaintiff creditor must notify a debtor that they have 30 days to submit a financial affidavit. If the defendant’s income and assets are exempt, the defendant may submit the affidavit in lieu of appearing in court. A capias warrant may only be issued if it appears from the financial affidavit that the defendant possesses non-exempt income.
The bill was passed by the Senate last legislative session, but was not addressed by the House of Representatives.