Wisconsin Regulator Issues Warning to Collectors in Form of ‘Emergency Guidance’

The state of Wisconsin yesterday became the latest state to try and protect its consumers via emergency regulations that restrict how debts are collected there, but while it did not include any specific measures, the state’s Department of Financial Institutions did make some eye-opening claims and threats.

A copy of the guidance can be accessed by clicking here.

[EDITOR’S NOTE: Have you signed up yet for a free webinar on Wednesday, April 15 at 1pm ET aimed at discussing all the different measures that states have taken to regulate debt collections during the coronavirus pandemic? No? You can sign up by clicking here.]

While the guidance acknowledged that the state law banning collectors from threatening or harassing a consumer must be viewed in context, it warned that “Practices that may have been typical or customary under normal conditions may be deemed harassment under conditions of a global pandemic.” Further, collectors that assume that “business as usual will be acceptable” during the coronavirus pandemic may end up facing juries who have the power to levy punitive damages under the Wisconsin Consumer Act. And those jurors “will have lived through this crisis, and will judge debt collection practices distress through the lens of this period of shared global hardship and sacrifice. Debt collectors who fail to respect those hardships should expect to be judged harshly.”

The guidance also warns collectors that “no matter how many times they call,” they will not be able to persuade individuals to act “irrationally” by making payments on their debts, because missing payments “is the rational thing for them to do” right now as we all grapple with the effects that the COVID-19 outbreak has had. Telephone calls “are far too vital to be wasted on futile debt-collection calls” and screening calls may lead individuals “to ignore calls from unfamiliar numbers, missing some that may be critical.”

To make sure collectors know the law, the guidance includes the section of the Wisconsin Consumer Act that governs debt collection, and the Department of Financial Institutions included a copy of a letter that was sent yesterday to an auto loan servicer, pointing out some pre-crisis actions that it deemed were “impermissible.”

A growing number of states are enacting legislation or emergency regulations aimed at protecting consumers and providing relief in response to the COVID-19 pandemic. Massachusetts and Washington, D.C., have enacted emergency regulations that dramatically restrict how individuals can be contacted about their debts. North Carolina has enacted a 30-day deferral of debt payments. A bill in South Carolina called for a moratorium on medical debt collection. In Ohio, a bill was introduced that would halt all debt collection activities for the duration of the pandemic. The New Jersey legislature is also considering bills aimed at prohibiting certain types of debt collection activities.

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