The Wisconsin Department of Financial Institutions has issued some emergency guidance on debt collection during the coronavirus pandemic. Both creditors and debtors need to be aware of this new guidance and consider how it impacts them.
The Wisconsin Department of Financial Institutions (DFI) is the state government agency tasked with regulating our state’s banking and financial systems, and enforcing state-level consumer protection laws.
DFI collects reports required by state law, and it sometimes sends out auditors and inspectors to make sure the reports it is receiving are accurate.
The laws DFI enforces are passed by our state legislature, but the enforcement details are spelled out through the rulemaking process. Rules have the force of law, but are crafted by an agency.
Guidance documents do not have the force of law. Instead, they are meant to provide everyone with insight into how the DFI is enforcing the laws and rules already on the books.
What Is Changing?
DFI’s emergency guidance on prohibited debt collection practices stresses that DFI is not making new rules, it is just slightly changing how it interprets existing state law in light of the pandemic:
“Chapter 427 of the [Wisconsin Consumer] Act specifies prohibited practices when attempting to collect payments under consumer credit transactions, including any “conduct which can reasonably be expected to threaten or harass the customer or a person related to the customer.” Wis. Stat. § 427.104(1)(h). The drafters of the Act did not define “harass,” but dictionaries at the time of its enactment defined it as “to annoy continually” or “disturb persistently.” This broad, context-dependent meaning allows flexibility for courts and this Department to account for new economic conditions.
“Those new conditions have arrived… Many consumers who made pre-pandemic credit purchases were planning to make payments with revenue earned this spring. For millions, that work has now been cancelled or indefinitely postponed. Affected families are rationing financial resources until this crisis abates, reserving them for food, medicine, and other essentials. They’re going to miss payments on consumer credit transactions, through no fault of their own, because that is the rational thing for them to do.
“Debt collectors aren’t going to be able to talk people into behaving irrationally, no matter how many times they call. To repeatedly “disturb” or “annoy” them anyway is the definition of harassment…”
What Does This Mean?
This guidance is the government’s way of saying it cannot totally stop debt collection during the coronavirus pandemic, but that it thinks debt collectors should stop of their own accord because the DFI may decide it is harassment.
“Debt collectors who routinely rely on telephone calls as a debt-collection tactic should be forewarned: whether the conduct “can reasonably be expected to threaten or harass a consumer” depends on the context, and the worldwide context just shifted dramatically. Practices that may have been typical or customary under normal conditions may be deemed harassment under conditions of a global pandemic.”
The guidances goes on to say, “We cannot draw a precise boundary between permitted or prohibited communications with debtors, because each must ‘be considered in context.’”
This is not a helpful explanation. Clearly, the government is trying to persuade creditors to stop debt collection efforts.
At Hanson & Payne, we are advising our clients to keep this guidance in mind. We are keeping a close watch on DFI’s actions, and monitoring how creditors and debtors across the state are responding to this guidance. Please contact our office if you have questions.