Consumer protection legislation addresses predatory and deceptive practices of the debt collection industry in the Commonwealth
BOSTON – This week, the Massachusetts Senate unanimously adopted the Debt Collection Fairness Act as an amendment to S.2625, An Act Relative to Economic Development in the Commonwealth. The Debt Collection Fairness Act would protect borrowers against debt collector harassment, and empower consumers to repay debt and take more control over their economic security.
“I applaud the Senate for its unanimous support of this important legislation,” said Attorney General Maura Healey. “Reigning in unlawful and unscrupulous debt collection practices is essential to protecting the economic well-being of Massachusetts families.”
“The debt collection 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 State Senator Jamie Eldridge (D-Acton), the amendment’s lead sponsor. “The consumer protections contained in this bill are crucial to assisting Massachusetts residents in paying off outstanding debt while maintaining their dignity and autonomy. I want to thank Attorney General Healey for her strong support of this bill, and consumer protection advocates across the state who have been organizing for this bill over the past few years. I also want to thank Senate President Spilka and Senator Lesser for their strong support for this amendment.”
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 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 75 times the minimum wage, or $56,160 in 2019, with a 15 percent cap on earnings over that amount.
The statute of limitations for debt collection is 6 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 5 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.
S.2625 now goes back to the House of Representatives, which did not include the Debt Collection Fairness Act in their version of the economic development bill.