[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Notices]
[Pages 66972-66978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31316]
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FEDERAL TRADE COMMISSION
Notice of Maine Exemption From The Fair Debt Collection Practices
Act
AGENCY: Federal Trade Commission.
ACTION: Exemption from Sections 803-812 of the Fair Debt Collection
Practices Act granted to State of Maine.
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SUMMARY: The Commission is hereby publishing its decision to grant the
State of Maine an exemption from Sections 803-812 of the Fair Debt
Collection Practices Act for various classes of debt collection
practices conducted in Maine, in accordance with Section 817 of that
Act.
EFFECTIVE DATE: March 26, 1996.
FOR FURTHER INFORMATION CONTACT: John F. LeFevre, Division of Credit
Practices, Bureau of Consumer Protection, Federal Trade Commission,
Washington, D.C. 20580; (202) 326-3224.
SUPPLEMENTARY INFORMATION: The Fair Debt Collection Practices Act, 15
U.S.C. 1691 et seq. (``FDCPA''), prohibits a number of deceptive,
unfair and abusive practices by third party debt collectors.
Section 817 of the FDCPA requires that the Commission exempt from
its requirements any class of debt collection practices within any
State if, upon application, the Commission determines that under the
law of the State, the class of debt collection practices is subject to
requirements substantially similar to those imposed by the FDCPA, and
that there is adequate provision for enforcement. The State of Maine
Bureau of Consumer Credit Protection (``Applicant'') has filed an
application seeking exemption from the FDCPA for various classes of
debt collection practices in Maine.
The FDCPA prohibits debt collectors from using false or misleading
statements, harassing or abusive conduct or any unfair methods to
collect debts. Among the practices which are specifically prohibited
are making false threats to coerce payment (such as false threats of
suit); using deceptive collection notices that falsely appear to be
from an attorney or court; and engaging in any sort of harassment, such
as threatening violence, using profanity and obscenities, or making
continuous phone calls. The FDCPA also restricts the extent to which
debt collectors may call a consumer at work and prohibits them from
making calls to consumers very early in the morning or late at night.
With a few narrow exceptions, it prohibits collectors from contacting
third parties and revealing the existence of a consumer's debt. In
addition, the FDCPA prohibits collectors form adding charges to a debt
unless the consumer involved agrees to them or they are permitted by
law, and from filing suit against a consumer outside of the district of
the consumer's residence or where the contract creating the debt was
signed.
Under the FDCPA, if a consumer disputes the debt in writing, the
collector is required to stop all collection efforts until the debt is
verified. The FDCPA also states that if the consumer demands in writing
that the debt collector cease all further collection efforts, the debt
collector must comply even if the debt is valid. Finally, the FDCPA
gives a consumer the right to bring suit against a debt collector in
any court for violations of the FDCPA and, if successful, to receive
actual damages and additional damages up to $1,000, as well as costs
and attorney's fees.
The FDCPA is enforced primarily by the Federal Trade Commission. A
violation of the FDCPA is deemed an unfair or deceptive practice in
violation of the Federal Trade Commission Act. All of the functions and
powers of the Federal Trade Commission Act are available to the
Commission to enforce compliance with the FDCPA by any person. The
Commission may enforce the provisions of the FDCPA in federal court,
seeking civil penalties and injunctive and other relief as appropriate.
The Commission has promulgated procedures for state applications
for exemption form the provisions of the FDCPA, which are published in
16 C.F.R. 901 (1995) (``Procedures''). Section 901.2 of the Procedures
provides that any state may apply to the Commission for a determination
that, under the laws of that State, (1) any class of debt collection
practices within that State is subject to requirements that are
substantially similar to, or provide greater protection for consumers
than, those imposed under Sections 803 through 812 of the FDCPA; and
(2) there is adequate provision for state enforcement of such
requirements. Section 901.4 of the Procedures describes the criteria
for making the determination. Section 901.4(a) requires that (1) the
definitions and rules of construction in the state law import the same
meaning and have the same application as those prescribed by the FDCPA;
(2) debt collectors provide all the applicable notifications under the
state law that are required by the FDCPA; (3) debt collectors under the
state law take all affirmative actions and abide by obligations
substantially similar to, or more extensive than, those prescribed by
the FDCPA; (4) debt collectors under the state law abide by the same or
more stringent prohibitions as are prescribed by the FDCPA; (5)
obligations and responsibilities imposed on consumers under the state
law are no more costly, lengthy, or burdensome than corresponding
obligations or responsibilities imposed on consumers by the FDCPA; and
(6) consumers' rights and protections under the state law are
substantially similar to, or more favorable than, those provided by the
FDCPA. Section 901.4(b) requires that the Commission consider (1) the
facilities, personnel and funding devoted to administrative enforcement
of the state law; (2) provisions in the state law for civil liability
(for actions brought in the private sector) as
[[Page 66973]]
compared with Section 813 of the FDCPA; and (3) the statute of
limitations for civil liability in the state law (for actions brought
in the private sector) which should be substantially similar or longer
than that in the FDCPA. The Commission must consider each provision of
the state law in comparison with each corresponding provision in
Sections 803 through 812 of the FDCPA, and not the state law as a whole
in comparison with the FDCPA as a whole.
Section 901.3 of the Procedures requires that an application be
accompanied by a variety of documents including (1) the state law; (2)
a comparison of the provisions of the state law with various sections
of the FDCPA; (3) a copy of the full text of the law that provides for
its enforcement; (4) a comparison of provisions of the law that
provides for enforcement with the provisions of Section 814 of the
FDCPA; and (5) a statement identifying the state office designated to
administer the state law, along with a description of the ability of
that office to effectively administer the statute. If an application is
filed in accordance with the Procedures, Section 901.5 states that the
filing shall be published in the Federal Register. Section 901.6
provides that the Commission may grant an exemption under the
provisions of the Procedures.
Maine's application requests exemption from the provisions of the
FDCPA for various classes of debt collection practices in Maine
governed by Title 32 of the Maine Revised Statutes, Section 11001 et
seq. Maine seeks an exemption for the following classes of practices:
Collection by means of the mails and other interstate and intrastate
written communications; collection by use of telephone and other
electronic means of transmission; in-person collection; and
repossession or other ``enforcement of security interest'' activity. In
filing the application, Maine complied with Section 901.3 of the
Procedures.
On May 27, 1993, Applicant filed an addendum to it application of
February 25, 1993, stating that certain changes had been made to Title
32 of the Maine Revised Statutes, Section 11002.6. The definition of
the term ``debt collector'' was broadened to include attorneys whose
principal activities include collection of debts for clients.
Subsection 6 was further amended by including within the definition of
``debt collector'' any person who regularly engages in the enforcement
of security interests securing debts, but excluding any person who
retrieves collateral when a consumer has voluntarily surrendered
possession. A new Section 11017 authorizes a debt collector to take
possession of collateral after default under certain conditions.
Applicant asserts that the provisions of Maine's Fair Debt
Collection Practices Act (``Maine Act''), Me. Rev. Stat. Ann., Title 32
Section 11011 et seq., and related statutes are substantially similar
to, or provide greater protection for consumers than, the equivalent
provisions of the FDCPA, and that the State of Maine is able to provide
adequate enforcement of the Maine Act's requirements. Applicant's
request was published in the Federal Register for sixty days of
comment.\1\
\1\ 59 FR 24,159 (May 10, 1994).
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After evaluating the request and the comments received, the
Commission has determined that an exemption from Sections 803-812 of
the FDCPA for debt collection practices conducted within Maine should
be granted. Pursuant to Section 817 of the FDCPA, the Commission
analyzed whether the level of protection to consumers under the Maine
Act is substantially equivalent to that provided in the FDCPA and
whether there is adequate provision for enforcement of the Maine Act by
the State. In making this determination, the Commission considered each
provision of the Maine Act and compared it with the corresponding
provision in the FDCPA, in accordance with 16 C.F.R. 901.4, as
discussed below. The exemption proceeding as a whole was conducted
pursuant to 16 C.F.R. 901 et seq.
Comments
Two comments were received. One comment was from a consumer from
Virginia who objected to ``certain provisions of the debt collection
act being waived'' and expressed concern over ``state licensing to
avoid the Federal Debt Collection Practices Act'' and the monitoring of
state requirements. The second comment was from Harry W. Giddinge,
Deputy Superintendent of the Bureau of Consumer Credit Protection of
the State of Maine, addressing each question posed in the Commission's
Request for Comment and concluding in each case that the protection
afforded consumers by the Maine Act are substantially similar to, or
greater than, those provided by the FDCPA.
I. The Level of Protection to Consumers Provided by the Maine Act Is
Substantially Equivalent to or Greater Than That Provided by the FDCPA
Generally, the Maine Act either replicates the language of the
FDCPA or provides greater protection than the FDCPA. In the Federal
Register notice of Maine's application for exemption, the Commission
highlighted the language differences between the various sections of
the Maine Act and the FDCPA, each of which discussed is below.
A. Definitions (Section 803 of the FDCPA; Sections 11002, 11003, 11012
of the Maine Act)
1. Conducting Business Within the State
Section 11002.2 of the Maine Act limits the coverage of the Maine
Act to those conducting business in Maine; it has no precise
counterpart in the FDCPA because the FDCPA's jurisdiction is
nationwide. The jurisdiction of the Maine Act extends to violations by
debt collectors physically located in Maine and to non-residents doing
business in Maine, to the extent that the State's long-arm statute
affords jurisdiction over non-resident defendants.\2\
\2\ Maine's jurisdiction would extend, therefore, to those
transacting any business within the State to the extent permitted by
the due process clause of the Fourteenth Amendment of the U.S.
Constitution. Me. Rev. Stat. Ann., Title 14 Secs. 704-A.1--A.2.A
(1975).
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The definition reflects the limits of Maine's jurisdiction in
policing debt collectors as compared to the nationwide jurisdiction of
the Commission in policing debt collectors. The language limiting the
scope of Maine's enforcement only to violations committed in the State
by resident debt collectors as well as non-resident collectors acting
within the State does not affect the level of protection afforded to
Maine residents by the Maine Act as compared to the protection afforded
to Maine residents by the FDCPA.
2. Definition of Debt Collector
Maine's definition of debt collector in its Act is identical to
section 803(6) of the FDCPA, except that section 11002.6 of the Maine
Act also includes:
Persons who furnish collection systems carrying a name which
simulates the name of the debt collector and who supply forms or
form letters to be used by the creditor even though the forms direct
the debtor to make payments directly to the creditor.
Applicant views this provision as a logical extension of the
portion of section 803(6) that includes creditors using names other
than their own within the definition of debt collector. The State
provision functions to prevent creditors from using collection systems
that create the false impression in the mind of the consumer that a
debt
[[Page 66974]]
collector is involved in the collection process rather than the
creditor.\3\
\3\ As such, Section 11002.6 also provides much the same
protection as Section 812 of the FDCPA (which addresses form-
sellers).
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As compared to section 803(6) of the FDCPA, therefore, section
11002.6 of the Maine Act provides greater protection to the consumer
because it specifically includes those who routinely provide creditors
with the means of misrepresent the involvement of a debt collector in
the creditor's collection activities.
3. Collection Activities Related to a Business
Section 11003.8 of the Maine Act excludes from the definition of
``debt collector'' those whose collection activities are confined or
directly related to the operation of a business other than that of a
debt collector, such as a financial institution already regulated under
title 9-B of the Maine Banking Code. The FDCPA does not contain this
precise exclusion, although section 803(6) does exclude creditors
collecting their own debts in their own names, as well as other
designated groups such as government employees, process servers, non-
profit organizations and mortgage servicers.\4\ The section 11003.8
exclusion appears to be directed to persons who are not collection
agencies but collect their own debts on occasion. Presumbly, these
groups are employees or officers of creditors such as financial
institutions who collect only for themselves or others whose principal
business is not debt collection but who sometimes engage in collection
activity. These groups are also excluded by section 803(6) of the
FDCPA. Thus, the scope of the section 11003.8 exclusion in the Maine
Act is no greater than that provided by section 803(6) of the FDCPA.
The coverage of the two Acts, therefore, remains ``substantially
similar.''
\4\ Section 11003.1 of the Maine Act also excludes creditors
collecting in their own names.
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4. Attorneys
Section 11002.6 of the Maine Act specifically includes within the
definition of debt collector ``any attorney-at-law whose principal
activities include collecting debts as an attorney on behalf of and in
the name of clients.\5\ Section 803(6) of the FDCPA defines debt
collectors as persons who regularly collect debts for others or who are
engaged in a business the principal purpose of which is debt
collection. An attorney could fall within this definition. The FDCPA,
however, does not specifically cover attorneys, as a group, as does
Section 11002.6 of the Maine Act. In any event, the principle in both
is the same: a party must regularly collect debts for others or run a
debt collection business to be covered.
\5\ Section 11003.1 of the Maine Act, which previously excluded
attorneys from the definition of ``debt collector,'' was repealed
following Maine's initial request for exemption of February 25,
1993. Maine submitted an addendum to its application, dated May 27,
1993, reporting that Section 11002.6 of the Maine Act had been
modified by the legislature to include attorneys at law collecting
debts on behalf of their clients (Maine Public Law 126, May 18,
1993). The modification became effective in September 1993.
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The Maine Act \6\ differs from the FDCPA only in that it
specifically identifies attorneys who collect debts for clients as
``debt collectors.''
\6\ The Maine Act requires that the attorney's ``principal
activities'' include collecting debts.
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Because is specifically addresses attorneys, the definition of debt
collector in the Maine Act is more precise as to attorneys than section
803(6) of the FDCPA. Its coverage may be slightly more restrictive than
that of the FDCPA, depending upon how the phrase ``principal activities
include collecting debts'' is interpreted. We do not regard this latter
difference as significant. Neither Act excludes attorneys. As far as
attorneys are concerned, the requirements are substantially similar and
the level of protection afforded by the Maine Act is essentially the
same as that of the FDCPA.
5. Enforcement of Security Interests
Section 11002.6 of the Maine Act includes within the definition of
``debt collector'' any person regularly engaged in the enforcement of
security interests. According to the Applicant, this includes persons
who have engaged in this activity more than five times in the current
or previous calendar year. The definition expressly excludes persons
who routinely retrieve collateral when a person has voluntarily
surrendered possession. Similarly, the FDCPA's definition of ``debt
collector'' (Section 803 (6) (A)) includes any ``person * * * in any
business the principal purpose of which is the enforcement of security
interests.''
The Maine Act is more specific than the FDCPA and arguably more
strict since it would expressly include persons enforcing security
interests as infrequently as six times per year, whether or not that
activity is the ``principal purpose'' of the business, as set forth the
in FDCPA. Additionally, the FDCPA has never been interpreted to include
parties who are hired simply to ``pick up'' collateral. The coverage of
the Maine Act in this area is at least equal to, and probably greater
than, that of the FDCPA. Thus, the level of protection provided is also
at least equal to, and probably greater than, that provided by the
FDCPA.
6. Repossession Activity
Section 11017 of the Maine Act defines how repossession is to take
place and requires (1) that the debt collector/repossessor take
inventory of any unsecured property that it acquires along with the
repossessed property; and (2) that it notify the consumer that the
unsecured collateral will be available at the consumer's convenience.
There is no comparable definition in the FDCPA. Since Section 11017 of
the Maine Act places additional requirements on the debt collector to
supply information to the consumer, it provides greater protection to
the consumer in this area than does the FDCPA.
7. Conclusion
These comparisons reveal that the definitions of terms in the Maine
Act as a whole import the same meaning and have the same application as
those prescribed by Sections 803-812 of the FDCPA, in accordance with
Section 901.4(a) (1) of the Procedures. Therefore, as a whole, they
function to provide substantially similar or greater protection to
consumers than do the analogous definitions in the FDCPA.
B. Acquisition of Location Information (Section 804 of the FDCPA;
Section 11011 of the Maine Act)
Section 11011 of the Maine Act is virtually identical to Section
804 of the FDCPA; therefore, its requirements are ``substantially
similar'' to those in the FDCPA and debt collectors' obligations and
prohibitions under the Maine Act are the same as those prescribed in
the FDCPA, as mandated by Sections 901.4(a) (3) and (4) of the
Procedures.
C. Debt Collection Communications (Section 805 of the FDCPA; Section
11012 of the Maine Act)
Section 805 of the FDCPA and Section 11012 of the Maine Act are
virtually identical, with the exception of non-substantive language
differences and dissimilar references to related state and federal
laws. Thus, Maine's requirements in this area also meet the
``substantially similar'' test and debt collectors' obligations and
prohibitions under the Maine Act satisfy the requirements of Sections
901.4(a) (3) and (4) of the Procedures. Section 11012 of the Maine Act
also satisfies Section 901.4(a)(6) of the Procedures since the
consumer's cease communication rights
[[Page 66975]]
under that Section are the same as those in Section 805(c) of the
FDCPA.
D. Harassment and Abuse (Section 806 of the FDCPA; Section 11013.1 of
the Maine Act)
1. Publication of Debtor Lists
Like Section 806(3) of the FDCPA, Section 11013.1.C of the Maine
Act prohibits publication of lists of consumers who refuse to pay
debts. Both state and federal laws, however, except publications to
consumer reporting agencies or persons meeting the requirements of
their respective credit reporting acts, as defined in Sections 603(f)
or 604(3) of the federal Fair Credit Reporting Act (``federal FCRA'')
for the FDCPA and Title 10 of the Maine Fair Credit Reporting Act
(``Maine FCRA'') for the Maine Act.
The definition of a consumer reporting agency (Section 603(f),
federal FCRA; Section 1312.9, Maine FCRA) and the parties who have a
permissible purpose to receive the lists at issue (Section 604(3),
federal FCRA; Section 13121.33, Maine FCRA) are essentially the same in
both statutes. In fact, the Maine FCRA is based upon, and was designed
to supplement, the federal FCRA.\7\ Since the definitions are the same,
the limits on distribution of debtor lists are also the same. Thus, the
state law referenced in Section 11013.1 of the Maine Act is
substantially similar to Sections 603(f) and 604(3) of the federal
FCRA; it follows that the Maine Act's reference to the Maine FCRA does
not adversely affect the level of protection afforded by the Maine Act
as compared to Section 806(3) of the FDCPA.
\7\ Maine points out that in most cases in Maine FCRA is more
restrictive than the federal FCRA. The Maine FCRA (1) limits the
cost of credit reports; (2) limits the time in which a credit
reporting agency must investigate and verify or delete trade lines;
and (3) requires compliance by any credit reporting agencies serving
users in the State of Maine. The law also requires registration of
credit reporting agencies operating within the State.
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2. Reports to Consumer Reporting Agencies [Sections 806(3) and 807(8)
of the FDCPA; Section 11013.4 of the Maine Act]
There is nothing in the FDCPA that prohibits a collection agency
from reporting credit information to a consumer reporting agency. As
discussed above, Section 806(3) expressly permits distribution of
debtor lists to credit bureaus; Section 807(8) prohibits the
communication of false credit information and requires that a disputed
debt be reported as disputed. The Maine Act contains the same
prohibitions. In addition, however, Section 11013.4 of the Maine Act
prohibits a debt collector from reporting a debt solely in its own name
and requires instead that the name of the original creditor also be
included. The FDCPA contains no comparable requirement. The additional
Maine provision is designed to allow consumers who review their credit
reports to determine the source of a listed trade line rather than
require them to contact the collection agency to determine the identity
of the original creditor. Thus, the provision makes it easier for
consumers to verify the existence of debts as well as the parties to
whom they are owed. It provides greater protection in this area than
does the FDCPA.
3. Shame Automobiles and Shame Cards
Section 11013.1G. of the Maine Act specifically prohibits the use
of shame cards, shame automobiles and similar devices.\8\ Section 806
of the FDCPA contains no comparable prohibition. In all other respects.
Section 11013.1 of the Maine Act and Section 806 of the FDCPA are
identical. Thus, to the extent that ``shame'' devices are still in use,
the Maine Act arguably provides greater protection in this area than
does the FDCPA.
\8\ A shame car is an automobile with the name of the collection
company emblazoned on the door that is parked in front of the
debtor's residence and left there. A shame card is a calling card
containing the name of the collection agency that is left posted on
the debtor's door or other conspicuous spot that can be observed by
others.
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4. Compliance With Section 901.(4)(a) of the Procedures
The obligations and prohibitions applicable to debt collectors
required by Section 806 of the FDCPA are substantially the same as
those required by Section 11013.1 of the Maine Act. Therefore, Sections
901.4(a)(3) and (4) of the Procedures are satisfied.
E. False and Misleading Representations (Section 807 of the FDCPA;
Section 11013.2 of the Maine Act)
The two Acts prohibit the same false, deceptive or misleading
representations in the same manner except for the following:
1. Reference to the Maine Consumer Credit Code
Both Section 807(6) of the FDCPA and Section 11013.2.F(2) of the
Maine Act address false representations of the effect of a sale or
transfer of interest in a debt on the consumer. The two provisions are
the same, except that the Maine Act refers to practices prohibited by
Title 9-A of the Maine Consumer Credit Code and the FDCPA does not.\9\
Title 9-A of the Maine Consumer Credit Code prohibits a number of
actions that are not prohibited by the FDCPA, including confessions of
judgment, post-dated instruments, use of cross-collateral and wage
assignments. These and other similar provisions all inure uniquely to
the benefit of consumer-debtors in the State of Maine. Reference to
these practices in Section 11013.2.F(2) of the Maine Act, therefore,
provides an added measure of protection not present in Section 807(6)
of the FDCPA.
\9\ The Maine Act prohibits: The false representation or
implication that a sale, referral or other transfer of any interest
in a debt shall cause the consumer to: (1) Lose any claim or defense
to payment of the debt; or (2) Become subject to any practice
prohibited by the Act or the Maine Consumer Credit Code, Title 9-A.
(Emphasis added.) The FDCPA is the same except for the underlined
portion.
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2. Reference to Maine Fair Credit Reporting Act
Section 11013.2.P. of the Maine Act prohibits the false
representation or implication that a debt collector operates or is
employed by a ``consumer reporting agency,'' as defined by Title 10,
Section 1312, Subsection 4, of the Maine Fair Credit Reporting Act.
Section 807(16) of the FDCPA contains identical language, except that
it refers to a ``consumer reporting agency'' as defined by the federal
Fair Credit Reporting Act, 15 U.S.C. 1681a(f). As discussed previously,
the definitions of ``consumer reporting agency'' in both the Maine Act
and FDCPA are basically the same and the term has the same meaning in
both statutes.\10\ Thus, Section 11013.2.P. of the Maine Act is
substantially similar to Section 807(16) of the FDCPA.
\10\ The definition of ``consumer reporting agency'' in the
Maine Act refers to ``investigative consumer reports'' as well as
``consumer reports'' while the definition in the FDCPA refers only
to ``consumer reports.'' For these purposes, they are the same.
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3. Compliance With Section 901.4(a) of the Procedures
Section 807(11) requires that debt collectors clearly disclose the
nature and purpose of all communications made to collect a debt. The
Maine Act contains an identical requirement. Since the same
notification is mandated by both Acts, Section 901.4(a)(2) of the
Procedures, which requires that all notifications be the same, is
satisfied insofar as Section 807(11) is concerned. Similarly, since the
FDCPA and the Maine Act are identical in this area, with the exception
of references to state law, Sections 901.4(a) (2), (3) and (4) of
[[Page 66976]]
the Procedures, requiring the same or more stringent notifications,
obligations and prohibitions, are satisfied.
F. Unfair Practices (Section 808 of the FDCPA; Section 11013.3 of the
Maine Act)
Section 808 of the FDCPA prohibits eight specified unfair
practices; the preamble to Section 808 prohibits unfairness generally.
Section 11013.3 of the Maine Act prohibits precisely the same practices
as the FDCPA, plus several additional practices that are not included
in the FDCPA,\11\ and also contains a general prohibition against
unfairness. The inclusion of several additional practices in the Maine
Act increases the level of protection provided by the Maine Act, as
compared with the FDCPA. As such, the Maine Act provides for more
extensive obligations and more stringent prohibitions in this area than
does the FDCPA, in compliance with Sections 901.4(a)(3) and (4) of the
Procedures.
\11\ These include use of a notary to collect, commingling the
funds of the debt collector and its client, failing to return
collected funds to the creditor, and soliciting loans to pay a debt.
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G. Debt Validation (Section 809 of the FDCPA; Section 11014 of the
Maine Act)
Section 809 of the FDCPA requires disclosure of the amount of the
debt and the creditor, and requires a validation notice. It also
requires the debt collector to verify the debt if the consumer disputes
it within thirty days. Section 11014 of the Maine Act is identical.
Section 901.4(a)(2-4) of the Procedures, requiring that all applicable
notifications, obligations and prohibitions be the same or more
stringent, are satisfied since the requirements are identical.
Therefore, the protection they provide is ``substantially similar.''
H. Multiple Debts (Section 810 of the FDCPA; Section 11015 of the Maine
Act)
Section 810 of the FDCPA directs debt collectors to apply payments
for multiple debts in accordance with the directions of the consumer.
Section 11015 of the Maine Act is identical. Those requirements are,
therefore, also ``substantially similar'' and the protection they
provide is the same. In the same manner, Sections 901.4(a)(3), (4) and
(6) of the Procedures are satisfied.
I. Legal Actions by Debt Collectors (Section 811 of the FDCPA; Section
11013.3.N of the Maine Act)
Section 811 of the FDCPA permits debt collectors to bring legal
actions against consumers, but only in certain venues.\12\ Section
11013.3.N of the Maine Act prohibits debt collectors from instituting
suit in their own names or on behalf of others in any venue. Since no
suits are permitted, no venue provisions are appropriate. Since the
Maine Act insulates consumer from debt collector lawsuits in Maine, the
Maine Act provides greater protection to consumers than does the FDCPA,
which permits them. The fact that no suits are permitted also means
that the obligations and prohibitions applicable to debt collectors in
Maine are more stringent than those contained in the FDCPA, in
compliance with Sections 901.4(a)(3) and (4) of the Procedures.
\12\ Proper venues are where the real property is located or, if
no real property is involved, where the consumer lives or signed the
contract.
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J. Furnishing Deceptive Forms (Section 812 of the FDCPA; Section 11016
of the Maine Act)
Section 812 of the FDCPA prohibits furnishing collection forms,
knowing that they would be used to create a false impression that a
third party is involved in the collection of the debt. Section 11016 of
the Maine Act is identical. Since both statutes are substantively the
same, Sections 901.4(a)(3) and (4) of the Procedures are satisfied and
the level of protection provided to Maine consumers by the Maine Act is
the same as that provided by the FDCPA.
K. Civil Liability (Section 813 of the FDCPA; Section 11054 of the
Maine Act
Section 901.6(d) of the Procedures specifies that no exemption
shall extend to the civil liability provisions of Section 813 of the
FDCPA, which authorizes aggrieved consumers to sue debt collectors that
violate the Act privately. Therefore, Section 813 of the FDCPA is not
included within the scope of the exemption granted by the Commission in
response to Maine's request.\13\
\13\ The civil liability provisions of Section 11054 of the
Maine Act are identical to those in Section 813. This is also true
for the statute of limitations provided in Section 11054.4 of the
Maine Act (one year) which is the same as that provided in Section
813(d) of the FDCPA for private suits.
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L. Compliance With Sections 901.4(a)(5) and (6) of the Procedures
Section 901.4(a)(5) and (6) require that (1) the obligations and
responsibilities of consumers be no more costly, lengthy or burdensome
under the Maine Act than they are under the FDCPA; and (2) consumers'
rights and protections be substantially similar to or greater under the
Maine Act than those provided by the FDCPA. The Commission has already
determined that the protections provided by the Maine Act are the same
or greater than those provided by the FDCPA. In addition, consumers
must do nothing more under the Maine Act to receive these protections
than they do under the FDCPA. Therefore, the Commission determines that
the obligations and responsibilities of consumers under the Maine Act
are no greater than those imposed by the FDCPA. Thus, the Maine
application complies with Sections 901.4(a)(5) and (6) of the
Procedures.
M. Conclusion
Comparison of Sections 803-812 of the FDCPA with pertinent portions
of the Maine Act supports the following findings which meet the minimum
requirements of Section 901.4(a) of the Procedures: (1) Definitions and
rules of construction in the two laws import the same meaning and have
the same or similar application; (2) Debt collectors provide all
applicable notifications required by the FDCPA under the Maine Act; (3)
Debt collectors are required by the Maine Act to take affirmative
actions and abide by obligations that are substantially similar to
those required by the FDCPA within the same or similar time periods;
(4) Debt collectors must abide by the same or more stringent
prohibitions under the Maine Act as those under the FDCPA; (5)
Obligations and responsibilities of consumers under the Maine Act are
no more costly, lengthy or burdensome than those under the FDCPA; and
(6) The rights and protections of consumers under the Maine Act are
substantially similar to or more favorable than those provided by the
FDCPA. Therefore, the provisions of the Maine Act in general are
substantially similar to, or provide greater protection than, the
provisions of the FDCPA.
II. Enforcement of the Maine Act Is Adequate
In order for an exemption to be granted pursuant to Section 901.6
of the Procedures, the Commission must find that provisions for
enforcement of the Maine Act by the State are adequate. In order to
make this finding, the Commission must determine that the Maine Act
makes sufficient provision for: (1) Administrative enforcement,
including the necessary facilities, personnel and funding; (2) civil
liability under Section 813 for failure to comply; and (3) a statute of
limitations for civil liability of similar or longer duration than that
in Section 813 of the FDCPA.\14\
\14\ Procedures, Section 901.4(b). See also footnote 13. The
civil liability provisions and corresponding statute of limitations
for private suits are the same.
[[Page 66977]]
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A. Authority
Section 814 of the FDCPA authorizes the Commission to exercise all
its functions and powers under the Federal Trade Commission Act in
enforcing the FDCPA. A violation of the FDCPA constitutes an unfair or
deceptive act or practice in violation of the Federal Trade Commission
Act. The Federal Trade Commission Act authorizes a civil penalty of up
to $10,000 for each violation of the FDCPA done with actual or implied
knowledge of the FDCPA. Additionally, the Commission is empowered to
seek various forms of injunctive relief, as appropriate. The Statute of
limitations for actions brought by the Commission against debt
collectors is five years. 28 U.S.C. 2462.
Under the FDCPA, the Commission has no licensing or other
regulatory powers and cannot ``promulgate trade regulation rules or
other regulations with respect to the collection of debt collectors * *
*.'' \15\ Nor does the Commission have the power to pursue criminal
liability or impose criminal penalties for FDCPA violations. The
Commission's jurisdiction extends to any debt collector, as defined,
located in the United States.
\15\ Section 814(d), FDCPA.
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Subchapters III and IV of the Maine Act govern the licensing of
Maine's debt collectors as well as the administration and enforcement
of the Maine Act. In fact, a significant portion of Maine's authority
to administer and enforce its debt collection law lies in its licensing
power. No debt collector may conduct business in the State without a
license, which must be renewed every two years. In order to get a
license, a debt collector must submit financial statements and
references and agree to an investigation of its personnel and business
practices. Changes in ownership or management require a new
license.\16\ Licensees must be bonded.\17\ The State is responsible for
the safety and soundness of licensed debt collectors, as well as for
subsequent management if they become insolvent, much like a
receiver.\18\ Unlicensed debt collectors operating in the State are
subject to criminal penalties.\19\
\16\ Section 11031, Subchapter III, Maine Act.
\17\ Section 11032, Subchapter III, Maine Act.
\18\ Section 11038, Subchapter III, Maine Act.
\19\ Section 11040, Subchapter III, Maine Act.
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The State may make rules, in addition to those in the Maine Act,
pertaining to the operation of a debt collector's business to safeguard
the public interest \20\ and may issue ``advisory rulings'' concerning
the Maine Act.\21\ All form letters used by licensed debt collectors in
Maine must be approved by the State. Additionally, consumers must be
able to contact licensed Maine debt collectors at least 20 hours per
week.
\20\ Section 11034, Subchapter III, Maine Act.
\21\ Section 11035, Subchapter III, Maine Act.
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The Maine Act authorizes the State, through the Maine Attorney
General, to bring an action for civil penalties, not to exceed $5,000
per count, against any person who willfully violates the Maine Act, no
more than two years after the violation occurred.\22\ Additionally, the
State may, after appropriate investigation and examination of a
licensee's records, file a complaint with the State's administrative
court to suspend or revoke a debt collector's license for violation of
the Maine Act.\23\ There is no statute of limitations for a license
revocation proceeding. Finally, the State may also seek injunctive
relief, as appropriate.\24\
\22\ Section 11053, Subchapter III, Maine Act.
\21\ Section 11052, Subchapter III, Maine Act.
\21\ Maine Rules of Civil Procedure Sec. 65 (1967).
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While the civil penalties authorized by the Maine Act are smaller
than those authorized by the FDCPA and the statute of limitations for
actions brought by the State of Maine is shorter, there are also
significant strengths in the Maine Act that are not present in the
FDCPA. Overall, we believe that the strengths more than offset the
weakness to meet the test of adequacy in Section 817 of the FDCPA.
Principal in Maine's enforcement powers is its ability to suspend
or revoke a debt collector's license, effectively putting the collector
out of business in the State. There is no comparable power granted in
the FDCPA. In addition, the State can proceed against a debt collector
for civil penalties (albeit not as large as available under the FDCPA)
and injunctive relief and can criminally prosecute a debt collector for
operation without a license, which can result in a jail term. The
latter remedy also has no counterpart in the FDCPA. Maine's general
supervisory powers are also more extensive than the Commission's
powers. Aside from the State's investigatory authority in determining
whether to issue a license, it is responsible for monitoring the
financial stability of its licensees and may issue additional rules and
regulations governing their conduct--a power specifically denied the
Commission by Section 814(d) of the FDCPA.
Typically, the State takes action against an offending debt
collector fairly quickly after a violation is discovered.\25\ Because
of this, the average civil penalty recovered by the State is only
$1,000-1,500. Time-consuming investigations are rare; one or two
violative letters often trigger the commencement of an inquiry. Because
the State takes a ``hands-on'' approach to enforcement, an inquiry can
often be resolved expeditiously before much damage is done. This is an
extra benefit to the public and is in contrast to the more extensive
investigations pursued by the Commission where larger penalties are
usually more appropriate. We do not believe that the State's more
limited civil penalty authority and shorter statute of limitations
significantly impede its ability to enforce the Maine Act. Given its
other powers and the speed of its investigations, the State's overall
enforcement authority and effectiveness appear to be at least as great
as that possessed by the Commission in administering and enforcing the
FDCPA.
\25\ Interview, William Lund, Superintendent, Maine Bureau of
Consumer Credit Protection, September 6, 1994.
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B. Personnel and Facilities
The FDCPA is administered and enforced primarily by the staff of
the Division of Credit Practices in the Bureau of Consumer Protection.
Enforcement actions are typically pursued not only by headquarters
staff but also by regional office personnel. At any given time, the
Commission has several debt collection matters in investigative stages
or in the courts. Like other Commission staff, attorneys working on
debt collection cases have the resources of the federal government from
which to draw support.
The Bureau of Consumer Credit Protection in the State of Maine
enforces the Maine Act, Maine's Fair Credit Reporting Act and the Maine
Consumer Credit Code. The Bureau is staffed by fifteen employees,
including office staff, plus five field examiners. Its examiners review
collection agency practices and conduct investigations for the purpose
of licensing collection agencies. The examiners are trained in
financing and consumer credit and most have employment experience with
banks or mortgage companies. Examiners also attend a school for
examiners conducted by the National Association of Consumer Credit
Administrators to learn both state and federal debt collection
statutes. Examiner trainees accompany experienced examiners for an
eight month period of on-the-job-training. In exercising their
responsibilities, examiners spend about
[[Page 66978]]
fifteen percent of their time enforcing the Maine Act. Debt collector
licensing is also the primary responsibility of the Superintendent and
Deputy Superintendent of the Bureau of Consumer Credit Protection.
The Maine Bureau reviews the financial posture of collection firms
applying for licenses and handles numerous written debt collector
complaints each year, along with hundreds of telephone complaints and
questions. Three additional individuals in the office (consumer
assistance specialists) are trained to respond to these inquiries about
the activities of debt collectors, with regard to both federal and
state debt collection law; they also routinely petition the
administrator to initiate enforcement proceedings to deal with
suspected violations of the Maine Act. The agency has been involved in
at least four court actions in the past two years relating to
unlicensed practice or license revocation. In addition, the Maine
Bureau has obtained voluntary Assurances of Discontinuance from ten
debt collectors during the same time period. The Maine Bureau publishes
its enforcement actions and mails the information to all licensed
companies as a deterrent to further violative practices.
All license fees and examination reimbursement costs accrue to the
agency as dedicated revenue within the State's budget process. In
addition, a portion of creditor and lender ``volume fees'' based upon
the amount of consumer credit extended is also dedicated to enforcement
activities of the Maine Bureau, on the theory that the hiring of
collection agencies by consumer creditors justifies the funding by
those creditors of a portion of the cost of regulating them.
Approximately $100,000 of the Maine Bureau's total budget of $800,000
is derived from sources of revenue related to debt collection activity
and directed toward enforcement of the Maine Act.
Thus, the personnel, facilities and funding devoted to
administering and enforcing the Maine Act are comparable to the
resources expended by the Commission in enforcing the FDCPA. The fact
that these resources will be directed at the activities of debt
collectors in one state supports Maine's contention that it will have a
greater enforcement presence in the State of Maine under the Maine Act
than the Commission does nationally under the FDCPA.
C. Conclusion
After consideration of the facilities, personnel and funding
devoted to administrative enforcement of the Maine Act and the Maine
Act's provisions for civil liability and appropriate statutes of
limitations for both private and governmental actions, the Commission
finds that provisions for enforcement of the Maine Act are adequate, as
required by Section 901.4(b) of the Procedures.
Action Taken
Based on the submissions of the Maine Bureau of Consumer Credit
Protection in support of its request for an exemption and upon the
comments received, the Commission concludes that the Maine Act is
substantially similar to, and in some instances provides greater
protection than, the FDCPA and contains provisions for adequate
enforcement. As such, it meets all of the criteria set forth in Section
901.4 (a) and (b) of the Procedures. The Commission has granted to the
State of Maine an exemption from Sections 803-812 of the FDCPA for debt
collection practices conducted within the State on that basis, in
accordance with Section 817 of the FDCPA. The exemption will remain in
effect as long as state law continues to afford substantially
equivalent protection to that of the FDCPA.
To ensure that the conditions for an exemption continue to be met,
the State of Maine must provide notice to the Commission of any change
in its law, policies or procedures, including court decisions, that
would significantly affect whether the state law continues to afford
substantially equivalent protection and whether the State is
effectively enforcing the Maine Act. In any event, the State of Maine
must provide a report to the Commission not later than two years after
the date this exemption becomes effective, and every two years
thereafter, concerning the manner in which the State has enforced its
law. The Commission reserves the right to revise this reporting
requirement at a later date if circumstances warrant or to request
additional information as needed.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 95-31316 Filed 12-26-95; 45 am]
BILLING CODE 6750-01-M
