January 12, 2013

Aggressive Chicago Debt Collection Law Vote Put on Hold

A new debt collection law pushed by Chicago Mayor Rahm Emanuel did not receive an expected vote Wednesday when it was heard by the City Council Committee on License and Consumer Protection. At the urging of ARM industry representatives, the committee will receive input from debt collection stakeholders before proceeding next week.

Emanuel’s intent in the proposal was to license and regulate debt collectors operating in Chicago, similar to the law passed in New York City in 2009. But opponents said that the law was extremely aggressive and that no one on the debt collection side was consulted prior to the writing of the proposal.

The law would require debt collectors operating in Chicago to get licensed. The mayor’s plan would also require anyone trying to collect a business debt to keep detailed records of contact with the debtor and any payments made, and would allow for cash penalties and up to six months in jail for violations. And a provision in the law would suspend licenses for up to four years for even minor or technical violations of any collection law.

At a public hearing Wednesday, many business leaders gathered to voice their concerns.

“If you send out a letter to a consumer and inadvertently had the wrong font [print] size, you could lose your license for something that was innocent and done to a consumer in Texas or California,” Todd J. Lansky, president of the Resurgence Legal Group, told the Chicago Sun-Times. “Any innocent clerical error — something that’s not necessarily intentional to harm a consumer but a violation done by mistake — you can essentially lose your license for four years.”

Committee Chairwoman Emma Mitts noted that some in the medical community had also voiced their opinions, fearful that they could run afoul of the new law by compelling late paying patients to satisfy their outstanding bills.

Irwin Bernstein, a board member of the Illinois Collectors Association, commented to the Sun-Times, “If someone were to call up a debtor and claim to be a police officer, that’s a violation. That person should be punished. We all agree with that. The industry does not want bad people. We want to get the bad apples out. The ordinance proposed doesn’t address bad apples. It puts good people out of business.”

Mitts asked for a few additional days to review the language of the proposed ordinance before her committee voted. Over that time, it is expected that debt collection stakeholders will be consulted.