The District of Columbia will soon have in place what may be the most progressive law in the nation protecting consumers from unfair and abusive debt collection practices.
On June 7, 2022, the DC Council passed the Protecting Consumers from Unjust Debt Collection Practices Amendment Act of 2021 (B24-0357). The new law now awaits the Mayor’s signature and a congressional review period before becoming applicable on January 1, 2023. In the meantime, the Council already has put in place an emergency version of the law, which it also voted to extend at the June 7 legislative meeting.
The new law overhauls DC’s obsolete, 50-year-old, debt collection law. As amended, the law will apply to almost all forms of modern consumer debt, including credit card debt, medical debt, and condominium and homeowners association assessments. The amendments are built around far-reaching provisions requiring debt collectors (including original creditor banks and other lenders) and debt buyers (companies that purchase debt from those lenders) to prove they actually own the debt in question and have complete documentation related to the debt. Debt collectors must provide consumers with that documentation and other information about the alleged debt upon request whenever they attempt to collect it. And when debt collectors go to court, they must provide the defendant and the court with the same documentation and allege key information in their complaints.
The new law also:
- Amends and expands protections against deception, unfairness, and harassment in collecting debts (including limiting the number of collection calls and other communications that can be made to consumers in any 7-day period).
- Requires debt collectors to submit supporting evidence before a court judgment can be entered against a consumer, even where the consumer does not appear in the court case.
- Requires debt collectors to inform consumers in writing that they may have funds protected from being taken by debt collectors.
- Prohibits imprisonment for failure to pay a debt or to appear in court and adds protections for issuing civil bench warrants when a consumer fails to respond to a subpoena in a debt collection case.
- Amends the private right of action to provide for statutory damages and recovery of costs and attorneys’ fees (and eliminates the requirement that violations of the law must be “willful” to trigger a right to damages).
- Generally limits attorneys’ fees that a plaintiff can request in debt collection cases to 15% of the debt.
This bill comes at a pivotal time for DC residents dealing with the lasting financial impact of the pandemic and an uneven economic recovery. Racial disparities in debt collection are significant: the rate of collection in communities of color is five times the rate in white communities. Against this backdrop and the anticipated increase in collection activity coming out of the pandemic, the new law is an attempt at a more equitable recovery for Black and Latinx DC residents. The Racial Impact Assessment accompanying the bill found that the new law will “likely make progress towards achieving racial equity in the District of Columbia.”
Bill 24-0357 was introduced by DC Council Chairman Phil Mendelson (with active support from DC Attorney General Karl Racine) and co-sponsored by Councilmember Mary Cheh. Working with its partner organizations, including Tzedek DC, Legal Aid testified forcefully in favor of the new law and proposed amendments to the introduced version to further strengthen the consumer protections in the introduced bill. We thank Chairman Mendelson, Attorney General Racine, and Councilmember Cheh for their leadership on this issue and the full DC Council for taking this historic step to protect DC residents from damaging and unjust debt collection practices.