Washington State Senate Passes Flurry of Bills Aimed at Collection Industry

The Washington State Senate passed a trio of debt collection-related bills yesterday, sending two of them to the desk of Gov. Jay Inslee for his signature to become law and sending the other one back to the state House to approve an amendment before that one is sent to Gov. Inslee as well.

One of the bills that was sent to the governor would prohibit collectors from engaging in what is known as “pocket service” of collection lawsuits against individuals with unpaid debts. Pocket service allows collection agencies to serve an individual with a summons before filing the lawsuit in state court. Because the summons has no court date or case number, individuals do not realize their 20-day window to respond to the summons begins the day they receive it.

If signed into law, collection agencies would be allowed to serve individuals with a summons only after the summons and the complaint have been filed in Washington Superior Court and a case number has been assigned.

The pocket service legislation was spearheaded by Bob Ferguson, the Attorney General of Washington.

“Pocket service is an unfair shortcut for debt collectors intended to blindside Washingtonians with default judgments, allowing debt collectors to seize wages, bank account funds, or even foreclose on homes,” Ferguson said in a statement. “It’s about time we put a stop to this confusing practice.”

The State Senate also unanimously passed a bill that alters how collection agencies handle medical debts, including waiting 180 days before reporting an unpaid medical debt to a credit bureau, and including a notice in an initial collection letter that the individual may be eligible to receive charity care, among other provisions.

Individuals who make a payment on an unpaid debt after the state’s statute of limitations has expired will not restart the clock on the SOL under another bill that was passed by the Washington State Senate yesterday.

Finally, the state Senate also passed a bill that sets a lower limit for the amount of interest that can be charged on judgments obtained for unpaid debts. The bill that passed in the Senate contained an amendment that was not part of the bill that passed in the state House of Representatives, so the bill has been sent back to the House for approval before going to the governor for his signature or veto. Under the proposed legislation, the post-judgment interest rate would be set at 9%, down from 12% currently. Lawmakers had initially sought to lower the rate to 7.5%, which would be just under the national rate of 8%, but were unsuccessful.

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