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Congress Proposes Law to Exempt Creditor Lawyers from Debt Collection Regulations

Posted on in Debt Collection

Congress Proposes Law to Exempt Creditor Lawyers from Debt Collection RegulationsThe U.S. House of Representatives is considering legislation that would exempt creditors’ rights lawyers from the federal regulations meant for debt collectors. The Practice of Law Technical Clarification Act would amend both the Fair Debt Collection Practices Act and the Consumer Financial Protection Act of 2010 so that:

  • Law firms engaged in litigation are excluded from the definition of a debt collector; and
  • The Consumer Financial Protection Bureau does not have authority over attorneys who are not acting as debt collectors.

If the law passes, state courts would have primary authority to determine whether a creditor lawyer is guilty of misconduct in a case.

Lawyer Exemption

Congress did away with the creditor lawyer exemption in the FDCPA because it protected some attorneys who participated in illegal debt collection practices outside of their court cases. The change was meant to allow debtors to file lawsuits against lawyers for conduct not involving litigation. However, courts have allowed debtors to collect damages when lawyers make technical mistakes in filing litigation against debtors. Lawmakers did not intend for creditor attorneys to pay statutory damages for an honest mistake made when bringing a legitimate lawsuit against a debtor. The new law would protect lawyers from unnecessary lawsuits while still allowing state courts to hold lawyers accountable.

State vs. Federal Oversight

With the creation of the Consumer Financial Protection Bureau in 2010, lawmakers gave the bureau authority to enforce regulations against debt collectors, including creditor lawyers. However, creditor lawyers believe that the state court presiding over the case is in the best position to determine whether a creditor lawyer has committed a violation. Each state has its own consumer protection laws that regulate lawyer conduct. If a state court determines that a creditor lawyer’s actions were intentional and malicious, it has the authority to:

  • Award damages to the debtor;
  • Sanction and discipline the attorney; and
  • Dismiss the case.

The current laws give the federal government and debtor lawyers authority to disrupt legitimate debt collection cases for mistakes that a state court could easily rectify. A technicality should not prevent a creditor from retrieving debts from a non-compliant debtor.

Legitimate Legal Actions

An attorney filing a lawsuit on behalf of a creditor should not be treated the same as a debt collector. Lawsuits are a different form of debt collection that have their own rules that lawyers must follow. A Chicago creditors’ rights attorney at Walinski & Associates, P.C., can protect your debt collection case from unnecessary counter-lawsuits that serve only to make your collection efforts more difficult. To schedule a consultation, call 312-704-0771.


Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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