[Federal Register Volume 59, Number 89 (Tuesday, May 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11233]
[[Page Unknown]]
[Federal Register: May 10, 1994]
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FEDERAL TRADE COMMISSION
Notice of State Application for Exemption From the Provisions of
the Fair Debt Collection Practices Act
AGENCY: Federal Trade Commission.
ACTION: Invitation to comment on requested exemption from the
provisions of the Fair Debt Collection Practices Act.
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SUMMARY: The Commission is hereby publishing a notice that the State of
Maine has filed an application for exemption from the provisions of the
Fair Debt Collection Practices Act for various classes of debt
collection practices in Maine.
DATES: Written comments will be accepted until August 8, 1994.
ADDRESSES: Comments may be filed in person or mailed to: Secretary,
Federal Trade Commission, 6th & Pennsylvania Avenue NW., Washington DC
20580. Requests for copies of the application and of the Fair Debt
Collection Practices Act should be directed to the Federal Trade
Commission Public Reference Branch, Room 130; telephone (202) 326-2222.
FOR FURTHER INFORMATION CONTACT: John F. LeFevre or Roger J.
Fitzpatrick, Division of Credit Practices, Bureau of Consumer
Protection, Federal Trade Commission, Washington, DC 20580; (202) 326-
3224.
SUPPLEMENTARY INFORMATION: The Fair Debt Collection Practices Act, 15
U.S.C. 1691 et seq. (``Act'' or ``federal Act''), prohibits a number of
deceptive, unfair and abusive practices by third party debt collectors.
The Act prohibits debt collectors from using false or misleading
statements, harassing or abusive conduct or any unfair methods to
collect debts. Among those things 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 a court; and engaging in any sort of harassment, such as
threatening violence, using profanity and obscenities, or making
continuous phone calls. The Act 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 Act prohibits collectors from 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 (1) of the
consumer's residence or (2) where the contract creating the debt was
signed.
Under the Act, if a consumer disputes the debt in writing, the
collector is required to stop all collection efforts until the debt is
verified. The Act 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 Act gives
a consumer the right to bring suit against a debt collector in any
court for violations of the Act and, if successful, receive actual
damages and additional damages up to $1,000, as well as costs and
attorney's fees.
The Act is enforced primarily by the Federal Trade Commission. A
violation of the Act 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 by any person with the Act. The
Commission may enforce the provisions of the Act in federal courts
seeking civil penalties and injunctive and other relief as appropriate.
The Act requires that the Commission exempt from its requirements
any class of debt collection practices within any State if the
Commission determines under the law of that State that a class of debt
collection practices is subject to requirements substantially similar
to those imposed by the Act, and that there is adequate provision for
enforcement.
The Commission has promulgated procedures for State application for
exemption from the provisions of the Act which are published in 16 CFR
901 et seq. (1992) (``Rule''). Section 901.2 of the Rule provides that
any State may apply to the Commission for a determination that under
the laws of that State, 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 Act and that there is adequate
provision for State enforcement of such requirements. Section 901.4 of
the Rule describes the criteria for making the determination. In making
that determination the Commission primarily will consider each
provision of the State law in comparison with each corresponding
provision in Sections 803 through 812 of the Act, and not the Sate law
as a whole in comparison with the Act as a whole.
Section 901.3 of the Rule 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 Act; (3) a copy of the full text of the law that provides for
its enforcement; (4) a comparison of the provisions of the law that
provides for enforcement with the provisions of Section 814 of the Act;
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 these 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 Rule.
On February 25, 1993, the State of Maine Bureau of Consumer Credit
Protection (``applicant'') filed an application seeking exemption from
the provisions of the federal Act for various classes of debt
collection practices in Maine governed by Title 32 of 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 inter-state and intra-state written communication; collections by
use of telephone and other electronic means of transmission; in-person
collection; and repossession or other ``enforcement of security
interest'' activity.
On May 27, 1993, applicant filed an addendum to its 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 engaged 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 (``state Act''), 32 Maine Revised Statutes
Annotated, Section 11001 et seq., and related statutes are
substantially similar to, or provide greater protection for consumers
than, the equivalent provisions of the federal Act, and that the State
of Maine is able to provide appropriate enforcement of the state Act's
requirements.
I. Description of Differences Between the Federal Act and State Act and
Request for Comments on Differences
As summarized below, applicant compares Sections 803 through 812 of
the federal Act with comparable sections of the state Act.
(A) Definitions (Section 803 of the federal Act; Sections 11002,
11003 and 11012 of the state Act).
Applicant asserts that (1) most of the definitions in the state Act
are identical or substantially similar to those in the federal Act; (2)
other terms are comparable given the different levels of jurisdiction
involved (e.g., the federal Act's definition of ``Commission'' and the
state Act's definition of ``Superintendent'' each define the
responsible authority); and (3) other differences are not substantive.
The differences between the two statutes are as follows:
1. Applicant explains that the defining phrase set out in Section
11002.2, ``conducting business within this State,'' limits its scope to
the activities of any debt collectors who: (1) Are located in Maine, or
(2) solicit business and then collect debts or repossess collateral in
Maine, regardless of the collector's location. This application seeks
exemption of only those practices of debt collectors conducting
business within Maine, and the activities of debt collectors who have
voluntarily subjected themselves to Maine law by obtaining a debt
collector's license from Maine.
Public comment is sought as to whether the definition of
``conducting business within this State'' set out in Section 11002.2 of
the state Act affects the level of protection afforded by the state Act
as compared to the protection afforded by the federal Act.
2. Section 11002.6 of the state Act includes within the definition
of debt collector ``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.''
Public comment is sought as to whether the above included provision
in the definition of debt collector affects the level of protection
afforded by the state Act as compared to the protection afforded by the
federal Act.
3. Section 11003.8 of the state Act excludes from the definition of
``debt collector'' collection activities that are confined to and
directly related to the operation of a business other than that of a
debt collector, such as, but not limited to, financial institutions
regulated under Maine Revised Statutes Annotated, Title 9-B, Maine
Banking Code.\1\ Applicant believes that this section of the state Act
is non-substantive. Section 803(6) of the federal Act does not contain
this exclusion.
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\1\Applicant points out that the drafters of the Maine law chose
to place the ``exclusions'' as a separate section, as opposed to
itemizing those within the definition of debt collector.
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Public comment is sought as to whether the exclusion of certain
businesses, including financial institutions, among others, in Section
11003.8 of the state Act affects the level of protection afforded by
the state Act as compared to the protection afforded by Section 803(6)
of the federal Act.
4. Section 11002.6 of the state Act includes within the definition
of debt collector ``any attorney-at-law whose principal activities
include collection debts as an attorney on behalf of and in the name of
clients.''\2\
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\2\Section 11003.6 of the state Act, which previously excluded
attorneys from the definition of debt collector, was repealed
following Maine's request for exemption dated February 25, 1993.
Maine submitted an addendum to its application dated May 27, 1993,
wherein its exemption request was modified to reflect the inclusion
of attorneys within the state Act, as amended. (Maine Public Law
126, May 18, 1993).
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Section 803(6) of the federal Act defines debt collector as ``any
person who uses any instrumentality of interstate commerce or the mails
in any business the principal purpose of which is the collection of any
debts, or who regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or due
another.''\3\
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\3\The federal Act's definition of ``debt collector'' was
amended in 1985 to repeal the attorney at law exemption previously
set out in former Section 803(6)(F). An attorney is now a debt
collector under the federal Act, as amended, if the attorney's
efforts regularly to collect consumer debts on behalf of clients
include activities traditionally associated with debt collection,
such as sending demand letters (dunning notices) or making
collection telephone calls to consumers. See Commentary on the Fair
Debt Collection Practices Act, 53 FR 50097, 50102 (1988).
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Public comment is sought as to whether the inclusion of attorneys-
at-law as debt collectors in Section 11002.6 of the state Act affects
the level of protection afforded by the state Act as compared to the
protection afforded by Section 803(6) of the federal Act.
5. Section 11002.6 of the state Act, as amended,\4\ includes within
its definition of debt collector any person regularly engaged in the
enforcement of security interests securing debts. Persons who had
engaged in the enforcement of security interests more than five times
in the previous calendar year would be covered. If a person does not
meet those numerical standards for the previous calendar year, the
numerical standards are to be applied to the current calendar year. The
term does not include any person who retrieves collateral when a
consumer has voluntarily surrendered possession.
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\4\Section 11002.6 was recently amended by the State of Maine.
See Maine Public Law 126, May 18, 1993.
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The federal Act's definition of debt collector in Section 803(6)
``includes any person * * * in any business the principal purpose of
which is the enforcement of security interests.''
Public comment is sought as to whether the difference in coverage
between Section 11002.6 of the state Act and Section 803(6) of the
federal Act affects the level of protection afforded by the state Act
as compared to the federal Act.
6. Section 11017 of the state Act\5\ provides that a debt collector
acting on behalf of a creditor may take possession of collateral only
if possession can be obtained without entry into a dwelling, unless
that entry has been authorized after default and without the use of
force or other breach of the peace. A debt collector must take
inventory of any unsecured property acquired along with the repossessed
collateral and immediately notify the consumer that the property will
be made available in a manner convenient to the consumer. There is no
comparable provision in the federal Act.
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\5\This section was recently enacted by the state of Maine in
the same statute that included attorneys within the definition of
debt collector. Although it is in a section separate from Section
11002 of the state Act, it deals with a debt collector's rights and
obligations when repossessing property for creditors.
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Public comment is sought as to whether the difference in coverage
between the state Act and the federal Act affects the level of
protection afforded by the state Act as compared to the federal Act.
(b) Acquisition of location information (Section 804 of the federal
Act; Section 11011 of the state Act).
Applicant asserts that the state Act is virtually identical to its
federal counterpart and therefore meets the substantially similar test
set out in Section 901.2 of the Rule.
(C) Communications in connection with debt collection (Section 805
of the federal Act; Section 11012 of the state Act).
Applicant asserts that, with the exception of non-substantive
stylistic language differences and differing references to the
appropriate respective state or federal related provisions, the two
sections are virtually identical and therefore are substantially
similar as required under Section 901.2 of the Rule.
(D) Harassment or abuse, false and misleading representations and
unfair practices (Sections 806, 807, and 808 of the federal Act;
Sections 11013.1, .2 and .3 of the state Act).
1. Section 11013.1.C of the state Act prohibits publication of a
list of consumers who allegedly refuse to pay debts, except to a
consumer reporting agency or to persons meeting the requirements of
Title 10, Chapter 210 of the Maine statutes, which is the Maine Fair
Credit Reporting Act.
The language of the state Act and the federal Act is identical
except for the differing references to the federal Fair Credit
Reporting Act and the state Fair Credit Reporting Act.
Public comment is sought as to whether reference to the Maine Fair
Credit Reporting Act, in lieu of reference to the federal Fair Credit
Reporting Act, affects the level of protection afforded by the state
Act as compared to the federal Act.
2. Applicant states that Section 806 of the federal Act and Section
11013.1 of the state Act both deal with harassment and abuse and
contain identical language. In addition, Section 11013.1.G of the state
Act includes prohibitions against use of ``shame cards'', ``shame
automobiles'' and similar devices, and these additions arguably provide
greater protection to consumers.
Public comment is sought as to whether the reference to ``shame
cards'', ``shame automobiles'' or similar devices in Section 11013.1.G
of the state Act affects the level of protection afforded by the state
Act as compared to the federal Act.
3. Applicant states that Section 807 of the federal Act and Section
11013.2 of the state Act dealing with false or misleading
representations are virtually identical and the state Act therefore is
substantially similar to the federal Act as required by Section 901.2
of the Rule.
4. Section 11013.2.F(2) of the state Act prohibits the false
representation that a sale, referral or other transfer of any interest
in a debt shall cause the consumer to become subject to any practices
prohibited by the state Act or Title 9-A, the Maine Consumer Credit
Code.
Public comment is sought as to whether the reference to Title 9-A
of the Maine Consumer Credit Code in Section 11013.2.F(2) affects the
level of protection afforded by the state Act as compared to the
federal Act.
5. Section 11013.2.P of the state 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.
Public comment is sought as to whether the reference to Title 10,
Section 1312, subsection 4, of the Maine Fair Credit Reporting Act
affects the level of protection afforded by the state Act as compared
to federal Act.
6. Applicant asserts that comparison of Section 808 of the federal
Act and Section 11013.3 of the state Act, dealing with unfair
practices, reveals that the state Act prohibits the same practices as
the federal Act, as well as several additional unfair practices.
The added unfair practices (subsections 11013.3. I through N)
include use of notaries or public officials authorized to serve legal
papers to collect debts; employing the services of an attorney unless
this is specifically authorized by the creditor in writing and none of
the lawyer's fees will be sought or received by the collector; failing
to return claims to the creditor, failing to account to a client for
monies collected, and failing to return valuable papers to the
creditor; commingling collector and creditor funds; use of creditor's
money in collection of debts; soliciting loans to pay a debt or
recommending persons as a source of funds to pay a debt; and
threatening to bring legal action in the collector's own name or
instituting suits on behalf of others or furnishing legal advice.
Thus, applicant asserts that the state Act is substantially similar
to the federal Act, as required by Section 901.2 of the Rule, and
arguably provides greater protection than the federal Act with the
addition of the several added unfair practices.
Public comment is sought as to whether the additional designated
unfair practices contained in subsections 11013.3. I through N affect
the level of protection afforded by the state Act as compared to the
federal Act.
7. Section 11013.4 of the state Act provides that a debt collector
may not report solely in its own name any credit or debt information to
a consumer reporting agency as defined by Title 10, Section 1312,
subsection 4. The applicant asserts that this additional requirement
provides clarification to consumers regarding their credit reports by
requiring that debt collectors report debts using the names of the
original creditors.
Public comment is sought as to whether the additional requirement
in Section 11013.4 of the state Act affects the level of protection
afforded by the state Act as compared to the federal Act.
(E) Validation of Debts and Multiple Debts (Sections 809 and 810 of
the federal Acts; Sections 11014 and 11015 of the state Act).
Applicant states that the Maine provisions are virtually identical
to the federal Act and therefore are substantially similar as required
by Section 901.2 of the Rule.
(F) Legal actions by debt collectors (Section 811 of the federal
Act).
Applicant states that since the state Act prohibits debt collectors
from filing lawsuits (Section 11013.3.N), no provisions relating to
venue are set out in the Maine law because they are not needed.
Applicant asserts, therefore, that the lack of a state equivalent to
Section 811 of the federal Act (restricting venue in suits brought by
collectors) does not result in a diminution of protection afforded
Maine consumers.
Public comment is sought as to whether the absence of a venue
provision in the state act affects the level of protection afforded by
the state Act as compared to the federal Act.
(G) Furnishing certain deceptive forms (Section 812 of the federal
Act; Section 11016 of the state Act).
Applicant asserts that since the language of both sections is
virtually identical, the state Act is substantially similar to its
federal counterpart as required by Section 901.2 of the Rule.
Applicant also asserts that in all of the above discussed Maine
statutory provisions, except as noted: (1) each of the provisions of
the state Act is either identical or substantially similar to Sections
803 through 812 of the federal Act as prescribed by Section 901.2 of
the Rule; and (2) no other state laws, including administrative or
judicial interpretations, are related to or would have a diminishing
effect upon the effectiveness of the state Act.
II. Comparison of Provisions for Enforcement Between Federal Act and
State Act
As summarized below, applicant compares Sections 813 and 814 of the
federal Act to the state Act.
(A) Civil liability (Section 813 of the federal Act; Section 11054
of the state Act).
Applicant states that Section 11054 of the state Act, titled
``Civil liability,'' is identical to those provisions of Section 813 of
the federal Act. The state Act establishes private causes of action for
aggrieved consumers, while at the same time protecting debt collectors
who pattern their activities in conformance with advisory rulings of
the state administrator. Remedies under the state Act are identical to
those set forth in the federal Act. The one year limitation of action
found in the federal Act is mirrored in Section 11054.4 of the state
Act.
(B) Administrative enforcement (Section 814 of the federal Act;
Sections 11040, 11051, 11053 and Subchapter III of the state Act,
Licensing and Administration).
1. Applicant states that much of the regulatory authority of
Maine's Bureau of Consumer Credit Protection, the relevant state
agency, is derived from the licensing powers granted in the state Act.
To the extent that the state agency is held responsible not only for
the initial licensing, bonding and safety and soundness of collection
companies, but also for the subsequent management of debt collectors if
they become financially unsound, the state Act arguably provides
greater protection to consumers than the general enforcement provisions
of Section 814 of the federal Act, since the federal Act does not
provide licensing authority. Additionally, state law specifically
provides for the investigation of practices and examination of records
of collectors by state examiners. State law also permits assessing
charges for expenses incurred pursuant to these examinations.
Public comment is sought as to whether the provisions for licensing
and administration in Subchapter III of the state Act affect the level
of protection afforded by that Act as compared to the federal Act.
2. Sections 11051 and 11040 of the state Act provide for license
revoking authority and criminal penalties for operation without a debt
collector's license. The federal Act grants no licensing authority to
the Commission.
Section 11053 of the state Act authorizes the Superintendent for
Consumer Credit Protection, acting through the Attorney General of
Maine, to bring an action for civil penalties, not to exceed $5,000,
against any person who willfully violates the state Act. No civil
penalty pursuant to the state Act may be imposed for violations of the
state Act occurring more than 2 years before the civil action is
brought.
Section 814 of the federal Act authorizes the Commission to
exercise all its functions and powers under the Federal Trade
Commission Act, 15 U.S.C. et seq., to enforce the federal Act. A
violation of the federal Act 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 federal Act done with actual or implied knowledge
of that Act. 15 U.C.S. 45(m)(1)(A). Additionally, the Commission is
empowered to seek injunctive relief, as appropriate. 15 U.S.C. 53(b).
No remedy under the Federal Trade Commission Act is available for
violations occurring more than 5 years before the civil action is
brought. 28 U.S.C. 2462.
Public comment is sought as to the level of protection afforded by
the enforcement authority granted by Sections 11051, 11053 and 11040 of
the state Act as compared to that in the federal Act.
III. Information Regarding the Bureau of Consumer Credit Protection and
Its Ability To Administer Maine's Debt Collection Laws
Applicant states that Maine's Bureau of Consumer Credit Protection
enforces the state Act as well as Maine's Fair Credit Reporting Act.
The Bureau includes an office staff of ten individuals, plus five
examiners in the field. It conducts reviews of collection agency
practices through a staff of examiners and it licenses collection
agencies. It also requires bonding of collection agencies and reviews
of the financial posture of collection firms applying for licenses.
Staff members are trained to handle consumer complaints and questions
from consumers concerning debt collection activities; thousands of
educational consumer brochures are distributed. A Bureau newsletter
distributed within Maine and throughout New England chronicles license
and enforcement actions.
The agency receives funding through licensing fees, examination
reimbursement costs, and other assessments that, when combined, make up
approximately $100,000 of the agency's $800,000 total budget.
Public comment is sought as to whether the Maine Bureau of Consumer
Credit Protection's ability to administer the state Act affects the
level of protection afforded by the state Act as compared to the
federal Act.
By Direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 94-11233 Filed 5-9-94; 8:45 am]
BILLING CODE 6750-01-M
