Earlier today, the DC Council passed landmark legislation making permanent changes to DC’s debt collection rules for the first time since 1971, before the District of Columbia Home Rule era. The Council reformed DC’s debt collection law by, among other things, expanding its scope to for the first time include medical debt, requiring debt collectors to substantiate their claims with documentation of the debts they are collecting, strengthening anti-harassment protections, and increasing the protections against debt collectors using arrest warrants to coerce payment by DC residents.
These changes are essential as debt collection activities in the District have increased dramatically in recent years. In 2016, the five largest debt collectors filed 2,284 small claims cases in DC alone. By 2019, the number of cases spiked by 81 percent, to 4,148 cases. This trend is likely to continue as debt collectors re-start their practice of filing mass lawsuits against consumers facing financial difficulties from the fallout of the pandemic.
Debt collection is a racial equity issue in DC and nationally. For example, Urban Institute data shows that DC residents living in majority-Black census tracts are subjected to debt in collection at five times the rate of people living in majority-white census tracts—36 percent versus just 7 percent. Similarly, a Pro Publica analysis showed that in cities around the country, debt collection lawsuits are disproportionately filed against Black residents even when controlling for differences in income.
The bill passed by the Council, titled the Protecting Consumers from Unjust Debt Collection Practices Amendment Act of 2022, seeks to protect DC residents from unfair and unjust debt collection practices by making permanent the temporary protections passed in 2021 and expanding upon them. This permanent legislation:
Expands the protections’ scope
Defines protections for “consumer debt” broadly to cover all personal, family, medical, or household debts, which is important because the outdated statute provided protections mostly limited to installment loans, a very narrow category of debts .
Strengthens anti-harassment measures
Prohibits creditors and debt collectors from making false threats and false reports and from disclosing or threatening to disclose a consumer’s citizenship status.
Stops creditors and debt collectors from contacting consumers at unreasonable hours or with unreasonable frequency (capping the number of unsolicited messages per 7-day period and requiring that opt-out requests must be included and complied with).
Prevents debt collectors from visiting a consumer’s home or place of employment other than to serve process in a lawsuit.
Contains enforcement mechanisms and penalties for violations .
Limits punitive actions that can be taken against DC residents facing debt collection suits
Generally caps the attorneys’ fees that a plaintiff can seek in a debt collection lawsuit at 15 percent.
Protects DC residents from being imprisoned for failure to pay or appear in debt collection cases and raises the threshold for the issuance of bench warrants, an issue that has become increasingly important as certain debt collection lawyers have used the coercive tactic of obtaining arrest warrants in debt collection cases .
Addresses the underlying causes of default judgments
The U.S. Department of Justice and National Science Foundation have noted that “every day court dockets are filled with debt collection cases that end in default judgments. This reality affects people’s belief in the fairness of the justice system.” The act includes important protections to limit default judgments. These include:
Robust evidentiary requirements that must be met for a debt collector to file a case, win a judgment, or collect on a debt (especially significant for unrepresented defendants as it means that the burden is on the debt collector, not the individual without a lawyer when it comes to the issue of whether the complaint is properly substantiated).
Requiring debt buyer plaintiffs to submit affidavits from prior holders of the debt to prove that they are the legitimate owners of the debt and that the original debt was valid.
Requiring verification of defendant’s current address immediately prior to commencing an action and proof of service that includes a time-stamped photograph and readable GPS coordinates indicating the location of service.
Tightens the statute of limitations
Specifies a three-year statute of limitations on debt, regardless of whether the debt is labeled “under seal” .
Prevents plaintiffs from suing where the statute of limitations has lapsed .
Stops “zombie debts” from coming back to life through payments or affirmations made after the expiration of the statute of limitations.
Provides language access
Requires initial notices in both English and Spanish unless the contract or initial oral communication with the consumer was in another language, in which case the notice must be given in English and that other language.
Informs consumers of their rights
Requires debt collectors to inform consumers at key stages during the process that their income and assets might be protected by law and that a legal services provider may be able to provide advice.
These comprehensive protections are the result of years of advocacy by Tzedek DC, our partners at the Legal Aid Society and Legal Counsel for the Elderly, and a terrific group of allies. In the years before Tzedek DC opened our doors in 2017, Councilmembers had introduced several debt collection reform bills. However, it was not until the COVID-19 pandemic and its massive impact on DC residents’ stability that the DC Council finally in 2022 passed these reforms.
Tzedek DC Founding President and Director-Counsel Ariel Levinson-Waldman emphasized:
We are particularly grateful for the leadership shown by Council Chair Phil Mendelson, who introduced the bill, Councilmember Mary Cheh, the bill’s co-sponsor, and DC Attorney General Karl Racine and the Office of the Attorney General, which provided key leadership within the government on this important reform. We give profound thanks to the DC residents—like Tzedek DC client Virginia Woodfin and fellow community members directly impacted by the current system—who took the time and shared their experience and perspective with the Council. We are also grateful to the allied organizations that testified and provided expertise, including AmeriHealth Caritas DC, Center for Responsible Lending, Legal Aid Society for the District of Columbia, Legal Counsel for the Elderly, Pew Charitable Trusts, and The Trial Lawyers Association of Metropolitan Washington, DC.
The Act is currently being reviewed by Mayor Bowser and, when it takes effect after a period of passive review by Congress, it will apply as of January 1, 2023. In the meantime, the temporary version of the Act passed by the DC Council last year is expected to be continued to avoid a gap in protections for DC residents.
For more information on the Act, please see:
Tzedek DC’s earlier releases regarding the temporary legislation and its November 2021 testimony in support of the permanent legislation.
The Council Office of Racial Equity’s Racial Equity Impact Assessment of the legislation, which noted in part that while much remains to be done, “[t]hese reforms will likely make progress toward achieving racial equity in the District of Columbia.”
Community members or others with questions about the new protections can contact Tzedek DC rg@tzedekdc.org or (202) 274-7386.
About Tzedek DC
Tzedek DC’s mission is to safeguard the legal rights and financial health of DC residents with lower incomes facing the often-devastating consequences of debt collection and credit-related obstacles. This mission is carried out as racial justice work in response to the massive wealth gaps tracking race in DC and nationwide. Of Tzedek DC’s clients, 90% are African American, 60% are women, and 25% are disabled community members. Our strategic approach combines three synergistic activities: (i) free legal representation and advice and financial counseling; (ii) working in coalition to make systemic change; and (iii) providing community legal education on debt collection, identity theft, and credit management. Since 2017, Tzedek DC has served over 2,500 DC client households in legal matters, saving an average of $2,151 per full representation case—the equivalent to more than three and a half weeks’ wages at DC’s minimum wage—and has helped catalyze systemic reforms benefiting hundreds of thousands of DC residents.