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Executive Orders Impacting Collections

  • Written by Michael Starzec

No, this is not a review of the 1996 thriller starring Kurt Russell, Halle Berry and Steven Seagal but it does focus on the prestige of the word “Executive.”   At hotels and sports arenas, you want the executive suite. In Illinois, at least a 1,000 corporations integrate “executive” into their name. (Including one named Executive Elite 007 Club! Where can I sign up?)   William Holden and Barbara Stanwyck starred in a movie about control of a furniture company! You think they would have done a furniture movie if it wasn’t named Executive Suite? However, in the past few weeks, we have become familiar with the word in a different context – executive orders.   In fact, as I was outlining this article, both my governor and the Washington State’s governor issued new orders addressing wage garnishments. Simultaneously, executive agencies dispensed additional directives on collections.   Thus, we recall the root word for executive is execute.

Thanks to COVID, we are learning a lot about the operation of government vis-à-vis private enterprise, particularly regarding collections.     In my home state, we have been fortunate that our agencies and governor have been very balanced.   The same cannot be said elsewhere.   For example, in one state, their financial regulator issued “guidance” on collection calls that was neither evenhanded nor professional: “Debt collectors aren’t going to be able to talk people into behaving irrationally…, to “repeatedly disturb” or “annoy.”   The agency “forewarned” that practices that “may have been typical… may be deemed harassment…”

Now, there is a significant body of federal case law setting out when and how often a collector can call.   Yet, the “guidance” indicated that typical practices may be harassment – does that mean compliance with the FDCPA is no defense against the regulator? Sadly, there is no answer to that question as guidance noted that it “cannot draw a precise boundary between permitted and prohibited communication.”   Thus shrouded in nebulosity, the document went on to darkly assert that collectors “should expect to be judged harshly” by jurors who lived through the pandemic.     Guidance is defined as “advice aimed at resolving a problem.”   Here the root word is used in a different context – not as guidance aimed at resolution, but more as a guided missile aimed at us.

                We have come to expect politically pejorative pronouncements about creditors and collections. One need only look at pending Senate Bill sponsored by Sherrod Brown, Elizabeth Warren and Corey Booker that would shut down collections through the national shelter-in-place order and for 120 days after the pandemic for that revelation. But shouldn’t we expect that executives and regulators be aware of what is actually happening in the arena they regulate?   For our firm and our clients, from the outset of the pandemic, decisions were made to limit filings, calls and freeze post-judgment execution.     Few restrictions or orders were in place at that time and, as information about the spread of the virus was known, our clients and our firms responded in kind.   No one told our clients to do this.   For our part, our firms are working with judges to rapidly turnaround releases on bank accounts and I know this just didn’t happen to my firm or my state.     The plaudits given to private companies assisting in the production of critical supplies are well-earned.   The efforts undertaken by our firms and clients are also worthy of respect.    

                Even before this pandemic, clients would notify us of call restrictions in regions impacted by natural disasters. All our clients have extensive and robust hardship policies.     Most importantly, at all times, but particularly now, we and our clients view our call teams as a lifeline between our clients and a consumer in need.     Imagine if the nation shut down law firms.     How is a consumer whose bank account is frozen going to navigate filing an emergency motion without a law firm to act as an efficient intermediary?   How well will the consumer fare when they have to call an 800 number of one our bank clients with a call center in a different state (or country), possessing no legal expertise?   It is clear that regulators are not aware of previous or current efforts to provide a balanced approach to consumer/creditor relations.   Nor are they cognizant of how court closures mean no consumer is going to be forced to court in the midst of the pandemic.  

                But the truth is, our representatives, regulators and governors do not know these facts because doing our jobs professionally is not something the media will cover.   The media will cover CFPB reports that a 100,000 complaints were received about collections.   From experience in legislative meetings, a single anecdote provides the basis for consumer regulation.   Knowing these facts, it is more important than ever for collection professionals to organize, engage advocates and coordinate with state and local banking associations to supply critical information to policymakers.   Having a full time, not per-crisis, advocate lays a long term foundation that is indispensable to good government and should be considered as important as an insurance policy.   We are not going to change the narrative but if you want to avoid Steven Seagal style legislation, please employ a Kurt Russell instead.

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