The House Financial Services Committee recently advanced a bill, H.R. 5082, that could have major implications for the default servicing industry, and most especially the law firms that work within it. The bill amends the definition of “debt collectors” under the Fair Debt Collection Practices Act to exclude “any law firm or licensed attorney engaged in litigation activities in connection with a legal action in a court of law to collect a debt on behalf of a client to the extent that such legal action is served on the defendant debtor, or service is attempted, in accordance with the applicable statute or rules of civil procedure.”
The House Financial Services Committee voted 35-25 to advance the bill, which was introduced by Rep. Alex Mooney (R-West Virginia) and is also known by its full title as the “Practice of Law Technical Clarification Act of 2018.” If passed, the bill would undoubtedly make life easier for the many legal firms with a focus on default servicing.
The proposed bill further defines the “activities in connection with a legal action” as:
- Serving, filing, or conveying formal legal pleadings, discovery requests, or other documents pursuant to the applicable rules of civil procedure; or
- Communicating in, or at the direction of, a court of law, or in the enforcement of a judgment; or
- any other activities engaged in as part of the practice of law, under the laws of a State in which the attorney is licensed, that relate to the legal action.
The bill also addresses the Consumer Financial Protection Act of 2010 and clarifies that the Consumer Financial Protection Bureau “may not exercise supervisory or enforcement authority with respect to attorneys engaged in the practice of law and not offering or providing consumer financial products or services.”
The bill must now be voted on by the full House, and then move on to the Senate.
In a write-up on their official website, ACA International, a U.S. trade group representing collection agencies, creditors, collection attorneys, and other debt collection industry service providers, stated, “ACA maintains that this bill is important to ensure that federal regulators do not impermissibly use their authority to regulate the practice of law, an authority that is properly left to the judicial branch. This bill is particularly critical to put a stop to the CFPB’s unauthorized overreach into the practice of law, a strategy that has substantially harmed debt collection attorneys.”