Regulatory Framework For Debt Collection

July 27, 2018 | 6 Comments

The Debt Collection Act 2018 aims to “eliminate abusive practices through the creation of a regulatory framework under which creditors and debt collectors may conduct business,” Minister of Home Affairs Walton Brown said in the House of Assembly today [July 27].

The Minister noted that he tabled, for consultation, the Debt Collection Act 2018, which “provides a comprehensive licensing regulatory framework for those entities engaging in Debt Collection under the newly created Debt Collection Licensing Authority.”

“You may ask why this Act is necessary. Historically, consumer transactions were presumed fair because it was assumed that buyers and sellers bargained from equal positions of power,” Minister Brown said.

“Complaints by consumers, however, demonstrate that they are inherently at a disadvantage especially in the areas of consumer debt and the collection of that debt.

“Our current debt collection practices are creating further consumer indebtedness due to exorbitant interest and administrative charges. This indebtedness is compounded by the lack of transparency and accountability to the debtor within the industry.

“The introduction of this Bill provides oversight by a Licensing Authority. The aim is to eliminate abusive practices through the creation of a regulatory framework under which creditors and debt collectors may conduct business.”

The Minister’s full statement follows below:

Mr. Speaker, earlier today I tabled for consultation the Bill entitled: ‘Debt Collection Act 2018’. The proposed Bill provides a comprehensive licensing regulatory framework for those entities engaging in Debt Collection under the newly created Debt Collection Licensing Authority. The Licensing Authority will be constituted from officers within Consumer Affairs.

Mr. Speaker, The Consultation Bill represents the first tranche of proposals to address the Government’s Throne Speech commitment to “introduce regulations for debt collection agencies; regulate payday lenders who lend money at extraordinary interest rates; and bring banking, insurance and other financial service conduct under the umbrella of an updated Consumer Protection Act.” Further legislation will be proposed to address consumer services provided by the banking, insurance and other financial service industries after consultation with the public and private sector stakeholder groups.

Mr. Speaker, you may ask why this Act is necessary. Historically, consumer transactions were presumed fair because it was assumed that buyers and sellers bargained from equal positions of power. Complaints by consumers, however, demonstrate that they are inherently at a disadvantage especially in the areas of consumer debt and the collection of that debt. Our current debt collection practices are creating further consumer indebtedness due to exorbitant interest and administrative charges. This indebtedness is compounded by the lack of transparency and accountability to the debtor within the industry.

Mr. Speaker, the introduction of this Bill provides oversight by a Licensing Authority. The aim is to eliminate abusive practices through the creation of a regulatory framework under which creditors and debt collectors may conduct business.

Mr. Speaker, the following are but a few examples of what will be considered as an unfair debt collection practice, including:

No proper verification of debt. Currently there is no legislative requirement to

  • [1] have proper documentation from the creditor to verify the debt is owed,
  • [2] recognise the debtor’s right to review the paperwork from the creditor,
  • [3] provide proper accounting of debt and interest repayments documentation to the debtor.

Currently there is no legislative authority to prevent the following:

  • [a] Predatory lending, including: applying excessive interest rates and penalties that cause or is likely to cause substantial financial harm not reasonably avoidable by the debtor. Financial harm can result from hidden charges, lack of transparency and significant changes to the borrowing rates when the debt is handed over to a debt collector agency.
  • [b] Misrepresenting or deceiving a debtor: by making false statements, lying to a debtor or in any way using deceit in his or her attempt to collect the debt. This includes but is not limited to an individual misrepresenting himself or herself as a law enforcement officer, a barrister or alleging powers he or she does not possess.
  • [c] Making harassing phone calls – Currently a debt collector is not prevented from causing the debtor’s phone to ring repeatedly or incessantly with the intent to harass, annoy, solicit or intimidate family members of the debtor to pay the debt.
  • [d] Using deceptive documents – Some creditors and debt collectors have sent documents intentionally designed to look like official Court documents or documents from any governmental agency.
  • [e] Misrepresenting the amount owed – There have been cases where a debt collector has misrepresented the amount of the debt or has not applied payment to a debt that is in dispute.
  • [f] Communicating with third parties – This has represented some of the most egregious actions; i.e. discussing the debtor or their debt with a third party or providing information about the debtor to anyone without verifying the veracity of the information shared.

Mr. Speaker, I have heard complaints from Bermudians that they were refused a job because information was allegedly shared by a debt collection agency.

Mr. Speaker, this Bill provides protection through accountability and oversight. The ‘Debt Collection Act 2018’ is divided into nine parts, the most significant being:-

  • Part 2 which establishes the Licensing Authority, the Debt Collection Officer and their functions.
  • Part 3 prescribes a comprehensive application process, including the criteria required to be granted a license.
  • Part 4 addresses the unfair debt collection practices that I have identified previously and describes further examples of harassment, making false or misleading representations and other such practices. Part 4 also gives the debtor right of access to verify the debt and describes the proper accounting procedures to ensure transparency. Most importantly, it places the debtor on equal footing with creditors and collectors ensuring accountability by all parties who engage in the process of extending credit and debt collection.
  • Parts 5 and 6 set out the rules for [a] lodging a complaint against a debt collection agency; [b] describing the power of the Debt Collection Licensing Authority to inspect records and investigate complaints; and [c] ordering compliance.
  • Part 7 establishes a Debt Collection Appeals Tribunal which gives access to the Debt Collection Agency and a debtor to appeal a decision made by the Debt Collection Licensing Authority.
  • Part 8 establishes Offences for unfair practices, willfully obstructing an investigation, improper conduct and other general offences.

Mr. Speaker, Due to the impact and timing of this initiative, the consultative process will run for a six week period ending 14th September. As this Bill represents a new regime for debt collection, it is necessary to consult with such stakeholders as the Bar Council; the Judiciary; Debt Collection Agencies; businesses that extend credit; business groups such as the Chamber of Commerce. There will also be a public relations campaign to obtain participation from the general public. At the conclusion of the consultation period the information will be reviewed and shared with the Attorney General’s Chambers in order to consider amendments to the Bill, where necessary.

Mr. Speaker, tabling this bill in this Parliamentary session will give us adequate time to complete the consultation and produce a final version of the bill in time to table the Bill early in the next Parliamentary session. I would ask all interested parties to use the 6-week consultation period to provide their input and concerns to assist in producing an Act that will benefit consumers who are debtors, companies that extend credit and the agencies responsible for collecting debts.

Thank you, Mr. Speaker

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Comments (6)

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  1. What about the NATIONAL DEBT says:

    The PLP Gvt is talking about a lot of things–but there is scant mention of the massive debt load we are carrying in this country.

    Why are they not addressing this issue???

    Clearly this is of national importance….

  2. Joe Bloggs says:

    With respect Minister, this is a solution to various problems that already have solutions. Any form of deception for profit is already unlawful. Misrepresentation is already unlawful. Making harassing telephone calls is already unlawful. Interest and other charges can be capped under the Interest and Credit Charges (Regulation) Act.

    It would be nice if the government would make the Bill available to the public so we can see what it actually says.

  3. S. Paw says:

    I trust too that the minister will stop the barbaric act of putting debtors in jail for non payment. I know several men this has happened to – while they are holding down decent jobs and genuinely struggling to meet ridiculous court orders for payment. Sending these guys to jail does nobody any good – neither the employer, the payer nor the payee. All too often too it is simply a tool by some miserable former family member to extract a perverse revenge.

    • gotcha says:

      If this happens, you can forget poorer people ever being lent money.

  4. Mb says:

    Another win for the government.
    This is long overdue and a good piece of legislation that will help make life a little easier for many people suffering under debt.

  5. aceboy says:

    Another regulatory framework.

    The PLP are good at producing frameworks, not so good at actually “doing”…

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