Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 1134 entitled:

begs leave to report as follows:

The purpose of this bill is to amend Hawaii's collection agency disclosure requirements by allowing an agency to disclose to the debtor in the initial written and initial oral, as opposed to all communications with the debtor, that the agency is attempting to collect a claim and that any information obtained will be used for that purpose.

Your Committee received testimony in support of this bill from Asset Recovery Group, Bureau of Medical Economics, LTD. Bureau of Consumer Economics, Credit Associates of Maui, Ltd., Credguard Corporation, Hawaiian Collectors Association Inc., Kauai Credit Adjusters, Ltd., Maui Collection Service, Inc., State Wide Collections, Select Consulting Service, Hawaii Financial Services Association, Collection Law Section of the Hawaii State Bar Association, and many private individuals.

The Department of Commerce and Consumer Affairs (DCCA) testified in opposition.

Your Committee finds that this bill, as received, may not be consistent with federal disclosure standards. The federal Fair Debt Collection Practices Act is designed to provide a one-time notice to the consumer about the nature of the claim, the debtor's right to obtain verification of the debt, and the debtor's right to dispute the debt and stop the collection process while the debt is being verified.

Testimony from DCCA indicated that debtors who are contacted by collection agencies are usually familiar with the debt, but may not always recognize the legal name of the creditor because they may have served as a co-obligor on a credit agreement signed many years ago or the debtor may be a victim of erroneous billing. Under such circumstances, it may be easy for debtors to disregard the initial notice as an error. Consistent notice to the debtor that collection efforts are being made will help clarify the process.

Although this bill conforms with federal standards to the extent that it requires notice to the debtor at the time of the initial contact, further amendments are necessary. Noting these concerns, your Committee has amended this measure to, for the most part, mirror the federal disclosure standard and exclude formal legal pleadings. Accordingly, this bill has been amended to:

1. Require a collection agency to disclose in subsequent communications that the communication is from a debt collector;
2. Provide that the failure of a collection agency to give clear notice in initial written and oral communications, and in subsequent communications, will not apply to a formal pleading made in connection with a legal action; and
3. Made other technical, nonsubstantive amendments for clarity and style.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1134, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1134, H.D. 1, and be placed on the calendar for Third Reading.