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New York attorney general: CARES Act payments are exempt from setoff, garnishment
On April 21, New York Attorney General Letitia James issued guidance clarifying that New York law exempts emergency stimulus payments made under the CARES Act from garnishment. Additionally, although New York law may, in certain circumstances, permit a bank to seize funds in a consumer’s account to pay a debt owed to the bank, the Office of the Attorney General views such a setoff against a CARES Act payment as unfair and abusive. James warned that the Office of the Attorney General would aggressively pursue any creditor or debt collector that garnishes or exercises a right of setoff against a CARES Act payment in violation of New York law.
Debt collection trade association claims Massachusetts emergency regulation is unconstitutional
On April 20, a debt collection trade association filed a complaint in the U.S. District Court for the District of Massachusetts against the Massachusetts attorney general, challenging the state’s emergency regulation issued in March, which makes numerous standard debt collection actions an unfair and deceptive act or practice during the Covid-19 pandemic. As previously covered by InfoBytes, the emergency regulation includes provisions that prohibit both creditors and debt collectors from (i) initiating, filing, or threatening to file debt collection lawsuits; (ii) garnishing wages and repossessing vehicles; and (iii) initiating phone calls with debtors, unless necessary to discuss a rescheduled court appearance or at the request of the debtor. Alleging violations of both state and federal law, including the First Amendment, Fourteenth Amendment, and the separation of powers, the trade association argues that the emergency regulations are a content-based restriction on free speech and unconstitutional because they, among other things, exclude six classes of collectors from the prohibition on placing collection calls, and do not treat all “communications” equally by excluding certain types of collections communications. The trade association also contends that the restrictions block members from providing consumers with possible resolutions, such as “temporary hardship repayment plans that may provide a variety of options for deferring payments or determining longer-term payment plans tailored to individual consumer situations where income has been interrupted for any reason.” The complaint also cites examples from debt collectors in the state that detail the negative impact the emergency regulation has had on their businesses. The trade association filed an emergency motion seeking a temporary restraining order and preliminary injunction enjoining enforcement of the regulation.
Nebraska attorney general issues warning about garnishing stimulus payments
On April 15, Nebraska Attorney General Doug Peterson warned that Nebraska law exempts certain income and property of low-income consumers from execution and attachment by creditors and debt collectors. The attorney general also warned that any attempt or threat to garnish or attach CARES Act stimulus funds that are exempt under Nebraska law will be considered an unfair trade practice under Nebraska’s Consumer Protection Act. Finally, the attorney general stated that his office is diligently monitoring consumer complaints, and encouraged consumers to file complaints if they experience aggressive debt collection during the Covid-19 crisis.
Massachusetts attorney general: CARES Act payments are exempt from seizure
On April 13, the Massachusetts Office of the Attorney General notified creditors and debt collectors that, in its view, stimulus payments made under the CARES Act are exempt from garnishment or attachment by creditors under Massachusetts law, and remain exempt regardless of how the funds are deposited or held after receipt. Any act, or threat to act, to garnish, attach, or otherwise seize the funds will be a violation of the attorney general’s regulations governing debt collection.
States ask Treasury to exempt stimulus payments from garnishment and urge CFPB to “vigorously enforce” FCRA
On April 13, a coalition of state attorneys general and the Hawaii Office of Consumer Protection (states) sent a letter to Treasury Secretary Steven T. Mnuchin, calling for immediate action to ensure that stimulus checks issued under the CARES Act to consumers affected by the Covid-19 pandemic are not subject to garnishment by creditors and debt collectors. While the CARES Act does not “explicitly designate these emergency stimulus payments as exempt from garnishment,” the states claim that a “built-in mechanism” contained within a provision of the CARES Act can rectify the legislative oversight. Specifically, the states point to Section 2201(h), which “authoriz[es] Treasury to issue ‘regulations or other guidance as may be necessary to carry out the purposes of this section,’” and ask Treasury to immediately designate the stimulus checks as “‘benefit payments’ exempt from garnishment.”
The same day, another coalition of state attorneys general sent a letter to CFPB Director Kathy Kraninger urging the Bureau to rescind an April 1 policy statement directed at consumer reporting agencies (CRAs) and furnishers (covered by InfoBytes here) that stated the Bureau will take a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the Fair Credit Reporting Act [(FCRA)] and Regulation V.” According to the states, the policy statement suggests that the Bureau does not plan on enforcing the CARES Act amendment to the FCRA, which requires lenders to report as current any loans subject to Covid-19 forbearance or other accommodation. The Bureau’s decision, the states contend, may discourage consumers from taking advantage of offered forbearances and other accommodations. The states also argue that allowing CRAs to take longer than the FCRA-prescribed 30 days to investigate consumer disputes puts consumers at risk. The states stress that the recent increase in Covid-19 scams has heightened the need for the Bureau to vigorously enforce the FCRA, and that, moreover, the thousands of complaints received by the states, FBI, FTC, and DOJ concerning phishing and other scams designed to gather consumers’ financial information have highlighted identity theft risks. The states emphasize “that even if the CFPB refuses to act. . .we will not hesitate to enforce the FCRA’s deadlines against companies that fail to comply with the law.”
D.C. enacts data breach requirements and consumer protections
On March 26, the mayor of the District of Columbia signed Act 23-268 to expand data privacy and consumer protection measures. Among other things, the “Security Breach Protection Amendment Act of 2020” (i) expands the definition of personal information subject to the Act; (ii) specifies the required contents of a security breach notification and requires that written notice of a breach involving 50 or more District residents be provided to the District’s attorney general; (iii) specifies security requirements for the protection of personal information, including for nonaffiliated third-party service providers; (iv) requires consumers to be provided at least 18 months of non-cost identity theft prevention services for data breaches involving the release of a social security or tax identification number; and (v) stipulates that a violation of these requirements is considered an unfair or deceptive trade practice. The Act takes effect following a 30-day congressional review period and publication in the District of Columbia Register.
California’s attorney general advises tenants of new rights
On April 7, the California attorney general issued updated guidance for California tenants that encourages them to take control of their rights under the state Judicial Council’s April 6 emergency eviction rule. The guidance alerts tenants that nothing in the emergency rule stops landlords from filing new eviction cases but it prevents them from proceeding for 90 days after the ongoing state of emergency is lifted. It also encourages tenants to research local eviction moratoriums that may provide additional protections.
South Carolina governor orders closure of non-essential businesses
On March 31, South Carolina Governor Henry McMaster signed an executive order closing non-essential businesses and public venues. McMaster’s order gave the South Carolina Department of Commerce the ability to review and designate essential businesses in the state, and where necessary, consult with the state attorney general for further clarification. The order followed a declared state of emergency announced by McMaster on March 13.
Massachusetts attorney general issues emergency regulation prohibiting certain debt collection practices
On March 27, the Massachusetts attorney general issued an emergency regulation that makes numerous standard debt collection actions an unfair and deceptive act or practice during the defined “state of emergency period.” Specifically, the emergency regulation prohibits both creditors and debt collectors from: (i) initiating, filing, or threatening to file any collection lawsuit; (ii) initiating or threatening to initiate any legal or equitable remedy for garnishment, seizure, attachment or withholding of wages, earnings, property or funds; (iii) initiating or threatening to initiate repossession of a vehicle; (iv) applying for, causing to be served or enforced, or threatening to apply for or enforce any capias warrant; (v) visiting or threatening to visit the household or place of employment of any debtor; and (vi) confronting or communicating in public with any debt regarding collection. In addition, the regulation also prohibits debt collectors from initiating phone calls with debtors, unless necessary to discuss a rescheduled court appearance or at the request of the debtor. These prohibitions do not apply to debts secured by mortgage on real property or debt owed by a tenant to an owner. The regulation will remain in effect for the early of: (i) 30 days after the lifting of the declared state of emergency; or (ii) 90 days.
Arizona attorney general requests financial assistance for Arizona consumers
On March 19, Arizona’s attorney general issued a request for financial and lending institutions to provide temporary relief to their Arizona customers. The governor’s requests for institutions included taking the following actions for at least 90 days: (ii) forbearing or deferring payments on mortgages, automobile loans, and consumer loans; (ii) postponing foreclosures and evictions; (iii) ceasing automobile repossessions; (iv) waiving late fees and default interest for late payments; and (v) halting negative credit reporting.