COMMENTARY: Rep. Gonzalez' bill would unfairly shield lawyers in debt collection cases

In a commentary, SMU Law Professor Mary Spector says a bill sponsored by U.S. Rep. Vicente Gonzalez, D-McAllen, if passed into law would remove important consumer protections in the debt collection process..

By Mary Spector, Genefieve Herbert Fajardo and Neil L. Sobol

HR 4550, a bill sponsored by U.S. Rep. Vicente Gonzalez, D-McAllen, that is expected to be taken up by a House committee today, if passed into law would remove important consumer protections in the debt collection process by giving attorneys a pass on accountability for unfair and deceptive practices under the federal Fair Debt Collections Practices Act if they file a lawsuit against an alleged debtor.

This change in the law could harm many Texas families. Approximately, 44 percent of adult Texans have a debt in collections and some counties in the Rio Grande Valley, including Gonzalez’s Congressional District 15, have some of the highest U.S. rates of people with a debt in collection.

In 2017, there were more than 162,000 debt collections cases filed — a 10 percent year-over-year increase since 2013. The majority of cases filed were for debt buyers — companies whose business it is to buy delinquent debts at pennies on the dollar to collect from consumers who, for the most part, do not have resources to contest the lawsuit. Approximately 30 percent of those cases resulted in a default judgment for the collector.

The harm resulting from judgments obtained through abusive litigation practices can have long-lasting effects, making it more difficult for consumers to obtain a loan, find a job or secure insurance.

Although current law is designed to protect consumers from unfair collection practices, few resources are available to consumers once a collection case is filed. The Fair Debt Collection Practices Act (FDCPA), in existence since 1977, currently penalizes debt collectors who use false, misleading or abusive practices to collect debts. But HR 4550 would carve out an exception, just for attorneys, to immunize them from liability when they abuse the debt collection process in court. The proposed bill is likely to lead to:

>> More lawsuits as attorneys rush to litigation to immunize their conduct in an already over-burdened court-system.

>> Less informal resolution of consumer debt as lawsuits become preferred method of collection.

>> More use of unfair litigation tactics, all now covered by the FDCPA, including: lawsuits against consumers in distant courts; lawsuits to collect zombie debt, and lawsuits to collect amounts not owed.

>> More judgments obtained through unfair means with long-lasting and devastating consequences to consumers.

The bill suddenly gained momentum and is scheduled to be considered for mark up today in the U.S. House Financial Services Committee. We, law professors at Texas law schools with practical experience representing both consumers and collectors, believe that lawyers occupy a privileged role in our justice system and should be held to the highest ethical and professional standards. Accordingly we write to express our personal belief that lawyers who engage in abusive litigation practices to collect consumer debt should not be immunized from liability under the FDCPA. To quote from Chief Justice Nathan Hecht’s 2015 address to the Texas Legislature, “justice for only those who can afford it is neither justice for all nor justice at all.”