ANNAPOLIS – In an effort to protect consumers, Attorney General Brian E. Frosh urged legislators Thursday to pass legislation requiring third-party debt buyers to have documentation that they are entitled to collect money owed, including papers stating the amount and source of the debt as well as proof that the debtor is in fact in arrears.
The measure, Senate Bill 771, would also bar third-party debt buyers from seeking payment if the statute of limitations has passed.
Frosh said the bill was prompted by his office’s investigation of the conduct of third-party debt buyers, those who buy for cents on the dollar overdue debts initially owed by consumers to banks and other lending agencies.
That investigation found “a series of problems,” including third-party debt buyers who had limited if any documentary evidence of money owed, Frosh said.
The paucity of documents — often just a spreadsheet — provided no certainty that the named debtor in fact owed money or that the statute of limitations for collecting the debt had not passed, Frosh told the Senate Judicial Proceedings Committee, which he chaired before his election as attorney general in 2014.
SB 771 would require a third-party debt buyer to produce documents attesting to the agreement between the debtor and the original creditor, as well documentation of any credits and charges attributable to by the debtor. The debt buyer would also have to produce documents showing it now owns the account payable.
Frosh said the bill’s documentation requirement is needed to prove the debt is in fact owed by the individual. The third-party debt buyers’ respect for the statute of limitations would ensure an end date for often aggressive collection attempts, he added.
Sen. H. Wayne Norman Jr., a committee member, voiced concern with the bill’s provision requiring third-party debt buyers to comply with the statute of limitations, which is often subject to interpretation.
Norman, R-Harford and Cecil, said the burden of proving the statute of limitations has passed is historically placed on the defendant, who would be the alleged debtor in these collection cases. The final decision on whether the statute of limitations has passed is reserved for the judge, Norman added.
“Whoever’s first name is ‘Your Honor’ ought to be making that call,” Norman said.
The burden of proof regarding the statute of limitations, however, was the only concern expressed during the hearing.
Representatives of debt-buyer organizations said their initial concerns with the legislation, including the statute of limitations, have been assuaged by their discussions with Frosh. These groups include the Maryland/District of Columbia Creditors Bar Association, the Mid-Atlantic Debt Collectors Association and DBA International.
Donald Maurice, outside counsel for DBA International, told the committee that his organization and Frosh have the same goal: “Stamp out bad practices by debt buyers.”
According to legislative analysts, Maryland’s commissioner of financial regulation received 375 written complaints about collection agencies in fiscal year 2015, which ended June 30.
SB 771 has been cross-filed in the House of Delegates as House Bill 1491.