Tighter control of debt collectors welcomed
New rules to protect consumers from unfair debt collection practices have been welcomed, but could meet “resistance” from the industry.
Henry Tucker, a litigation attorney, applauded the objective behind the proposed Debt Collection Act 2018 and described the drafted legislation as “well thought through”.
Members of Bermuda’s business community have been reviewing details of the proposed law since public consultation opened last month, when the Government said the Bill aimed to “eliminate abusive practices” through a regulatory framework for creditors and debt collectors.
However, it has raised questions among industry operators and a meeting to discuss concerns was expected to take place this week, before the Friday deadline for written submissions to Consumer Affairs.
Mr Tucker, counsel at Carey Olsen Bermuda, said: “This is a very strong piece of legislation that, if properly implemented, is going to bring long-needed structure to debt collection practices here and hopefully alleviate some of the burden on the Magistrates’ Court.”
He said the Act’s aim, which was in line with international practice, was important.
He continued: “The debt collection agencies, in my experience, have operated with varying degrees of professionalism over the years but have been uncensored by the ethical obligations of law firms and attorneys, and the reality is that the Debt Collection Act is designed to change the way they all do business.”
Practices likely to be affected include keeping lists of debtors to use when determining whether or not credit will be granted by another organisation.
The legislation also aims to ensure collectors properly identify themselves in phone calls and do not harass borrowers when trying to recover funds.
Mr Tucker believed there would be “significant resistance” from the island’s collection companies.
He said: “All of the existing agencies will have to fundamentally change the way they do business, and this will create a new opening for debt collection compliant agencies to enter the market.”
He told how local enterprises had been worried about an “ambiguity” arising from ministerial statements on the Bill. Business operators feared any company — from a self-employed handyman to utilities and telecommunications providers — would be subject to the regulation and require a debt collector’s licence.
However, in response to a query from The Royal Gazette, a government spokeswoman explained: “The draft Bill, which is out for consultation, proposes to regulate agencies where their sole business is collecting debt.”
She said companies providing other goods and services recover funds as “a consequence of offering credit” to customers.
“If they cannot successfully collect the debt, those companies may choose to use a debt collection agency,” she added. “It is the debt collection agency that would be regulated by this Bill.”
Walton Brown, the Minister of Home Affairs, earlier told MPs the Act was needed as “exorbitant interest and administrative charges” in collection practices were creating greater debts for consumers and this was compounded by a lack of transparency and accountability.
He said oversight by a licensing authority would tackle issues such as debt without proper verification, predatory lending — including hidden charges, and harassing phone calls.
One of the “most egregious” actions, Mr Brown said, was communication with other individuals or organisations, for example “discussing the debtor or their debt with a third party”.
However, Shirlene Nisbett, general manager at the Bermuda Credit Association, said the company’s policies were based on confidentiality.
She added: “We are dealing with people’s lives and it’s very sensitive information.”
She believed the association and similar bodies should have been consulted before the Act was drafted. Ms Nisbett said: “This business is two-sided ... When it comes to trying to collect outstanding debts this is not the easiest job to do, I just feel we should have been approached, we could have at least had our input.”
Among her concerns were the need for a clear definition on what constitutes “harassment” in the Act.
Stuart Lawrence, assistant manager, said the association’s clients were contacted to ensure they were aware of the Bill.
He added: “We wanted them to know that this is something that affects how you do business.”
Kendaree Burgess, executive director at the Bermuda Chamber of Commerce, said the organisation was reviewing the proposed legislation and had asked its members to respond to questions in a survey.
She added: “The chamber has met with the Department of Consumer Affairs and with member groups as part of the discovery period and will respond to the ministry’s request by the deadline.”
The Bermuda Debt Collection Agency has notified its clients and sought legal assistance in responding to the consultation.
Eintou Carmichael, the president, said: “From our perspective I wouldn’t want our fees to be lesser; for collection agencies, that’s all we make.”
She added: “We’re trying to work with people, we were even doing counselling with some people and trying to help people who have other problems, trying to sort out their bills and write letters on their behalf.
“We even tell people if you come in and pay $25 we see you are doing the best you can.”
It is understood collection agencies and their partners planned a meeting for tonight to discuss the Bill.
In July, when the legislation was tabled in the House of Assembly by Mr Brown, he asked “all interested parties” to use the six-week consultation period “to provide their input and concerns to assist in producing an Act that will benefit consumers who are debtors, companies that extend credit and the agencies responsible for collecting debts”.