Jerry Kopel

Free 14,000 humans from the need to register as debt collectors and solicitors, repeal a superfluous board, make it harder for criminals to be licensed, and restore one debtor right provided for in federal law and missing in state law: That's the goal of the Dept. of Regulatory Agencies (DORA) in their Sunset report to continue regulation of Collection Agencies in Colorado.

Colorado adopted language in 1985 similar to the law already in place at the federal level, the Fair Debt Collection Practices Act enforced by the Federal Trade Commission. This federal law pre-empted any state law on the same subject, except that a state law which provided equal or greater protection to the public from harassment by third party debt collectors was lawful.

The Collection Agency Board is a Type 2, or advisory board. Power over the collection law is vested in the administrator of the Consumer Credit Code in the Attorney General's (AG) office. While the board (at the discretion of the administrator) reviews claims against the bonds of licensed collection agencies, DORA reports board meetings do take (AG) employee time away from other more pressing collection law matters.

As to registration of employees of collection agencies, DORA states it "does not serve a public protection function." There is no education or experience required, and there is no background check, or testing to evaluate the employees' knowledge of the collection law. While there would be a negative fiscal impact of $84,000 per year, the program has excess reserves.

DORA would continue licensing collection managers and agencies, but would close a loophole in the law. Presently, the administrator is unable to use information collected as to all applicants' criminal convictions plus financial status, in order to deny a license. As DORA states. "It does not seem ethical to approve for licensure to collect defaulted debts, individuals that are currently in default on their own debts." And there are many criminals convicted of offenses other than financial crimes who pose a danger to the general public.

As to debtor rights, federal law prohibits agencies from continuing contact with a debtor if the debtor notifies the agency that they wish contact to cease. DORA states federal law allows the notice by debtor to be given orally, but state law requires notice to be in writing. DORA believes state law in this instance should be as protective as federal law.

There are other debtor rights in Colorado which are stronger than those in the federal law. They came into the act in agreement between collection agencies, legislators, and consumer groups in 1985. Some of those protections were in the state's collection law prior to 1985.

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HB 1155 Rep. McKay. Repeal of Debt Management Company regulation.

While the Dept. of Reg. Agencies (DORA) wants an increase in jurisdiction over collection agencies, DORA wants regulation of Debt Management Companies (Debt Adjusters) to cease, arguing that as many as 75 percent of debt adjusting is unlicensed, operating under exemptions in the present law. There are only five regulated debt management companies operating in Colorado, and one of the five is ceasing business.

These adjusters analyze expenses, debt, and income of the client debtor. They develop a Debt Management Plan (DMP) to provide relief to the debtor by negotiating directly with creditors for regular payments. The creditor, in turn, agrees to cease collection action as long as debtor adheres to the DMP.

In 1998, licensed companies served 10,000 clients and sent $43 million to creditors, which may mean as much as $172 million per year is processed from regulated and unregulated debt adjusters. A 10 percent "fair share" from creditors to debt adjusters accounts for most of debt adjuster "profits".

Willie Sutton robbed banks because that was where the money was. Money held and passed on by debt adjusters is not too shabby, and without regulation we may never know how much, if any, is being skimmed. For instance, attorneys who regularly engage in the collection of debts are subject to restrictions of the Collection Agency Law without being licensed as a collection agency, but attorneys who regularly engage in debt adjusting are not presently subject to the debt adjusting law.

DORA justifies deregulation on the basis there aren't complaints by consumers using non-regulated debt adjusters. To whom are those consumers supposed to complain? A better approach than total deregulation might be to bring all debt adjusters under the law in order to require audits paid for by the companies, to cap the "fair share" and fees paid by consumers, to reduce some prohibitions, and to provide more flexibility in disciplinary proceedings.

The key point I'm trying to make: If you don't have someone authorized to check in once in a while, how do you whether someone is stealing money from the debtor?

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There may be eleven or more bills before the legislature in 2000 regulating or deregulating occupations in Colorado either under the Sunset or Sunrise laws. Legislators may find it useful to cut out and keep the following "pure" definitions since many regulatory laws are actually hybrids.

REGISTRATION: The least restrictive form of regulation and the most suitable form of registration when there is low probability that practitioners will cause serious harm to the public.

DORA states: "In the classic form of registration, an applicant does not have to demonstrate any special qualifications. All that is required is that the individual registers his or her name, address and other background information. The most basic form of registration carries no assurance of competence as a result of state imposed standards."

CERTIFICATION: Provides title protection, but does not preclude others from practicing in the field. Examples are found in CRS 6-1-707 relating to dieticians and occupational therapists. In both occupations, the designation of dietician or occupational therapist or versions of the same title is limited to those persons who meet the educational standards set up in the statute. The law limits the use of "title" but not the "tasks" others may perform.

LICENSING: Defines the scope of practice, limits the occupation to persons who have achieved a certain educational standard, limits membership to persons who pass a test, provides disciplinary remedies for prohibited or unlawful acts by licensees, requires renewal of a license after a certain number of years.

SUNSET HEARINGS: In even numbered years, these bills begin in the House. In odd numbered years, they begin in the Senate.

Jerry Kopel writes a column for the Statesman based on 22 years past experience as a state legislator.


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