The Senate Banking and Insurance Committee hosted a public hearing Wednesday on a measure to expand consumer protection in reporting and collecting debt.
The Family Financial Protection Act (SB29), introduced by Democratic Sen. Linda Coleman, strengthens a host of regulations guiding communication about debt, how bills are reported to credit bureaus, and consumer ability to challenge debt.
In her opening statement to the committee, Coleman said, “We know that people in Alabama are hurting following job loss and a down economy and dealing with a number of finance issues that come from that. This bill is an attempt to help families before they’re pushed off the financial cliff. Inability to pay consumer debt leads to a vicious cycle that pushes people further to the edge and threatens their ability to keep jobs or pay for housing and basic necessities.”
The act includes several new consumer protections and collector obligations:
- The act calls for a uniform statute of limitations for consumer debts. After a period of time, debt would be automatically extinguished and neither the original collector nor any third-party buyer of debt would be able to take action against the consumer.
- Consumers could record telephone calls by debt collectors that they perceive as threatening or abusive.
- Creditors would no longer be able to pursue personal property, such as bank accounts, in an attempt to collect a debt.
- Consumers would be protected from arrest or imprisonment for failure to pay a creditor.
Rick Brown, president of the Alabama Retail Association raised concerns that the bill would make it too difficult for creditors to verify income and provide necessary credit options for consumers. “I think it’s admirable with Senator Coleman is trying to do,” Brown said. “Our industry feels this bill goes way too far and would restrict credit for consumers. We’re willing to work with Senator Coleman to see if there are things in this bill we can agree on.”
The committee agreed to form a subcommittee following the legislative session to work with Coleman and advocates on both sides of the issue.