Notice of Maine Exemption From The Fair Debt Collection Practices Act

FEDERAL TRADE COMMISSION

Notice of Maine Exemption From The Fair Debt Collection Practices

Act

AGENCY: Federal Trade Commission.

ACTION: Exemption from Sections 803-812 of the Fair Debt Collection

Practices Act granted to State of Maine.

-----------------------------------------------------------------------

SUMMARY: The Commission is hereby publishing its decision to grant the

State of Maine an exemption from Sections 803-812 of the Fair Debt

Collection Practices Act for various classes of debt collection

practices conducted in Maine, in accordance with Section 817 of that

Act.

EFFECTIVE DATE: March 26, 1996.

FOR FURTHER INFORMATION CONTACT: John F. LeFevre, Division of Credit

Practices, Bureau of Consumer Protection, Federal Trade Commission,

Washington, D.C. 20580; (202) 326-3224.

SUPPLEMENTARY INFORMATION: The Fair Debt Collection Practices Act, 15

U.S.C. 1691 et seq. (``FDCPA''), prohibits a number of deceptive,

unfair and abusive practices by third party debt collectors.

Section 817 of the FDCPA requires that the Commission exempt from

its requirements any class of debt collection practices within any

State if, upon application, the Commission determines that under the

law of the State, the class of debt collection practices is subject to

requirements substantially similar to those imposed by the FDCPA, and

that there is adequate provision for enforcement. The State of Maine

Bureau of Consumer Credit Protection (``Applicant'') has filed an

application seeking exemption from the FDCPA for various classes of

debt collection practices in Maine.

The FDCPA prohibits debt collectors from using false or misleading

statements, harassing or abusive conduct or any unfair methods to

collect debts. Among the practices which are specifically prohibited

are making false threats to coerce payment (such as false threats of

suit); using deceptive collection notices that falsely appear to be

from an attorney or court; and engaging in any sort of harassment, such

as threatening violence, using profanity and obscenities, or making

continuous phone calls. The FDCPA also restricts the extent to which

debt collectors may call a consumer at work and prohibits them from

making calls to consumers very early in the morning or late at night.

With a few narrow exceptions, it prohibits collectors from contacting

third parties and revealing the existence of a consumer's debt. In

addition, the FDCPA prohibits collectors form adding charges to a debt

unless the consumer involved agrees to them or they are permitted by

law, and from filing suit against a consumer outside of the district of

the consumer's residence or where the contract creating the debt was

signed.

Under the FDCPA, if a consumer disputes the debt in writing, the

collector is required to stop all collection efforts until the debt is

verified. The FDCPA also states that if the consumer demands in writing

that the debt collector cease all further collection efforts, the debt

collector must comply even if the debt is valid. Finally, the FDCPA

gives a consumer the right to bring suit against a debt collector in

any court for violations of the FDCPA and, if successful, to receive

actual damages and additional damages up to $1,000, as well as costs

and attorney's fees.

The FDCPA is enforced primarily by the Federal Trade Commission. A

violation of the FDCPA is deemed an unfair or deceptive practice in

violation of the Federal Trade Commission Act. All of the functions and

powers of the Federal Trade Commission Act are available to the

Commission to enforce compliance with the FDCPA by any person. The

Commission may enforce the provisions of the FDCPA in federal court,

seeking civil penalties and injunctive and other relief as appropriate.

The Commission has promulgated procedures for state applications

for exemption form the provisions of the FDCPA, which are published in

16 C.F.R. 901 (1995) (``Procedures''). Section 901.2 of the Procedures

provides that any state may apply to the Commission for a determination

that, under the laws of that State, (1) any class of debt collection

practices within that State is subject to requirements that are

substantially similar to, or provide greater protection for consumers

than, those imposed under Sections 803 through 812 of the FDCPA; and

(2) there is adequate provision for state enforcement of such

requirements. Section 901.4 of the Procedures describes the criteria

for making the determination. Section 901.4(a) requires that (1) the

definitions and rules of construction in the state law import the same

meaning and have the same application as those prescribed by the FDCPA;

(2) debt collectors provide all the applicable notifications under the

state law that are required by the FDCPA; (3) debt collectors under the

state law take all affirmative actions and abide by obligations

substantially similar to, or more extensive than, those prescribed by

the FDCPA; (4) debt collectors under the state law abide by the same or

more stringent prohibitions as are prescribed by the FDCPA; (5)

obligations and responsibilities imposed on consumers under the state

law are no more costly, lengthy, or burdensome than corresponding

obligations or responsibilities imposed on consumers by the FDCPA; and

(6) consumers' rights and protections under the state law are

substantially similar to, or more favorable than, those provided by the

FDCPA. Section 901.4(b) requires that the Commission consider (1) the

facilities, personnel and funding devoted to administrative enforcement

of the state law; (2) provisions in the state law for civil liability

(for actions brought in the private sector) as

[[Page 66973]]

compared with Section 813 of the FDCPA; and (3) the statute of

limitations for civil liability in the state law (for actions brought

in the private sector) which should be substantially similar or longer

than that in the FDCPA. The Commission must consider each provision of

the state law in comparison with each corresponding provision in

Sections 803 through 812 of the FDCPA, and not the state law as a whole

in comparison with the FDCPA as a whole.

Section 901.3 of the Procedures requires that an application be

accompanied by a variety of documents including (1) the state law; (2)

a comparison of the provisions of the state law with various sections

of the FDCPA; (3) a copy of the full text of the law that provides for

its enforcement; (4) a comparison of provisions of the law that

provides for enforcement with the provisions of Section 814 of the

FDCPA; and (5) a statement identifying the state office designated to

administer the state law, along with a description of the ability of

that office to effectively administer the statute. If an application is

filed in accordance with the Procedures, Section 901.5 states that the

filing shall be published in the Federal Register. Section 901.6

provides that the Commission may grant an exemption under the

provisions of the Procedures.

Maine's application requests exemption from the provisions of the

FDCPA for various classes of debt collection practices in Maine

governed by Title 32 of the Maine Revised Statutes, Section 11001 et

seq. Maine seeks an exemption for the following classes of practices:

Collection by means of the mails and other interstate and intrastate

written communications; collection by use of telephone and other

electronic means of transmission; in-person collection; and

repossession or other ``enforcement of security interest'' activity. In

filing the application, Maine complied with Section 901.3 of the

Procedures.

On May 27, 1993, Applicant filed an addendum to it application of

February 25, 1993, stating that certain changes had been made to Title

32 of the Maine Revised Statutes, Section 11002.6. The definition of

the term ``debt collector'' was broadened to include attorneys whose

principal activities include collection of debts for clients.

Subsection 6 was further amended by including within the definition of

``debt collector'' any person who regularly engages in the enforcement

of security interests securing debts, but excluding any person who

retrieves collateral when a consumer has voluntarily surrendered

possession. A new Section 11017 authorizes a debt collector to take

possession of collateral after default under certain conditions.

Applicant asserts that the provisions of Maine's Fair Debt

Collection Practices Act (``Maine Act''), Me. Rev. Stat. Ann., Title 32

Section 11011 et seq., and related statutes are substantially similar

to, or provide greater protection for consumers than, the equivalent

provisions of the FDCPA, and that the State of Maine is able to provide

adequate enforcement of the Maine Act's requirements. Applicant's

request was published in the Federal Register for sixty days of

comment.\1\

\1\ 59 FR 24,159 (May 10, 1994).

---------------------------------------------------------------------------

After evaluating the request and the comments received, the

Commission has determined that an exemption from Sections 803-812 of

the FDCPA for debt collection practices conducted within Maine should

be granted. Pursuant to Section 817 of the FDCPA, the Commission

analyzed whether the level of protection to consumers under the Maine

Act is substantially equivalent to that provided in the FDCPA and

whether there is adequate provision for enforcement of the Maine Act by

the State. In making this determination, the Commission considered each

provision of the Maine Act and compared it with the corresponding

provision in the FDCPA, in accordance with 16 C.F.R. 901.4, as

discussed below. The exemption proceeding as a whole was conducted

pursuant to 16 C.F.R. 901 et seq.

Comments

Two comments were received. One comment was from a consumer from

Virginia who objected to ``certain provisions of the debt collection

act being waived'' and expressed concern over ``state licensing to

avoid the Federal Debt Collection Practices Act'' and the monitoring of

state requirements. The second comment was from Harry W. Giddinge,

Deputy Superintendent of the Bureau of Consumer Credit Protection of

the State of Maine, addressing each question posed in the Commission's

Request for Comment and concluding in each case that the protection

afforded consumers by the Maine Act are substantially similar to, or

greater than, those provided by the FDCPA.

I. The Level of Protection to Consumers Provided by the Maine Act Is

Substantially Equivalent to or Greater Than That Provided by the FDCPA

Generally, the Maine Act either replicates the language of the

FDCPA or provides greater protection than the FDCPA. In the Federal

Register notice of Maine's application for exemption, the Commission

highlighted the language differences between the various sections of

the Maine Act and the FDCPA, each of which discussed is below.

A. Definitions (Section 803 of the FDCPA; Sections 11002, 11003, 11012

of the Maine Act)

1. Conducting Business Within the State

Section 11002.2 of the Maine Act limits the coverage of the Maine

Act to those conducting business in Maine; it has no precise

counterpart in the FDCPA because the FDCPA's jurisdiction is

nationwide. The jurisdiction of the Maine Act extends to violations by

debt collectors physically located in Maine and to non-residents doing

business in Maine, to the extent that the State's long-arm statute

affords jurisdiction over non-resident defendants.\2\

\2\ Maine's jurisdiction would extend, therefore, to those

transacting any business within the State to the extent permitted by

the due process clause of the Fourteenth Amendment of the U.S.

Constitution. Me. Rev. Stat. Ann., Title 14 Secs. 704-A.1--A.2.A

(1975).

---------------------------------------------------------------------------

The definition reflects the limits of Maine's jurisdiction in

policing debt collectors as compared to the nationwide jurisdiction of

the Commission in policing debt collectors. The language limiting the

scope of Maine's enforcement only to violations committed in the State

by resident debt collectors as well as non-resident collectors acting

within the State does not affect the level of protection afforded to

Maine residents by the Maine Act as compared to the protection afforded

to Maine residents by the FDCPA.

2. Definition of Debt Collector

Maine's definition of debt collector in its Act is identical to

section 803(6) of the FDCPA, except that section 11002.6 of the Maine

Act also includes:

Persons who furnish collection systems carrying a name which

simulates the name of the debt collector and who supply forms or

form letters to be used by the creditor even though the forms direct

the debtor to make payments directly to the creditor.

Applicant views this provision as a logical extension of the

portion of section 803(6) that includes creditors using names other

than their own within the definition of debt collector. The State

provision functions to prevent creditors from using collection systems

that create the false impression in the mind of the consumer that a

debt

[[Page 66974]]

collector is involved in the collection process rather than the

creditor.\3\

\3\ As such, Section 11002.6 also provides much the same

protection as Section 812 of the FDCPA (which addresses form-

sellers).

---------------------------------------------------------------------------

As compared to section 803(6) of the FDCPA, therefore, section

11002.6 of the Maine Act provides greater protection to the consumer

because it specifically includes those who routinely provide creditors

with the means of misrepresent the involvement of a debt collector in

the creditor's collection activities.

3. Collection Activities Related to a Business

Section 11003.8 of the Maine Act excludes from the definition of

``debt collector'' those whose collection activities are confined or

directly related to the operation of a business other than that of a

debt collector, such as a financial institution already regulated under

title 9-B of the Maine Banking Code. The FDCPA does not contain this

precise exclusion, although section 803(6) does exclude creditors

collecting their own debts in their own names, as well as other

designated groups such as government employees, process servers, non-

profit organizations and mortgage servicers.\4\ The section 11003.8

exclusion appears to be directed to persons who are not collection

agencies but collect their own debts on occasion. Presumbly, these

groups are employees or officers of creditors such as financial

institutions who collect only for themselves or others whose principal

business is not debt collection but who sometimes engage in collection

activity. These groups are also excluded by section 803(6) of the

FDCPA. Thus, the scope of the section 11003.8 exclusion in the Maine

Act is no greater than that provided by section 803(6) of the FDCPA.

The coverage of the two Acts, therefore, remains ``substantially

similar.''

\4\ Section 11003.1 of the Maine Act also excludes creditors

collecting in their own names.

---------------------------------------------------------------------------

4. Attorneys

Section 11002.6 of the Maine Act specifically includes within the

definition of debt collector ``any attorney-at-law whose principal

activities include collecting debts as an attorney on behalf of and in

the name of clients.\5\ Section 803(6) of the FDCPA defines debt

collectors as persons who regularly collect debts for others or who are

engaged in a business the principal purpose of which is debt

collection. An attorney could fall within this definition. The FDCPA,

however, does not specifically cover attorneys, as a group, as does

Section 11002.6 of the Maine Act. In any event, the principle in both

is the same: a party must regularly collect debts for others or run a

debt collection business to be covered.

\5\ Section 11003.1 of the Maine Act, which previously excluded

attorneys from the definition of ``debt collector,'' was repealed

following Maine's initial request for exemption of February 25,

1993. Maine submitted an addendum to its application, dated May 27,

1993, reporting that Section 11002.6 of the Maine Act had been

modified by the legislature to include attorneys at law collecting

debts on behalf of their clients (Maine Public Law 126, May 18,

1993). The modification became effective in September 1993.

---------------------------------------------------------------------------

The Maine Act \6\ differs from the FDCPA only in that it

specifically identifies attorneys who collect debts for clients as

``debt collectors.''

\6\ The Maine Act requires that the attorney's ``principal

activities'' include collecting debts.

---------------------------------------------------------------------------

Because is specifically addresses attorneys, the definition of debt

collector in the Maine Act is more precise as to attorneys than section

803(6) of the FDCPA. Its coverage may be slightly more restrictive than

that of the FDCPA, depending upon how the phrase ``principal activities

include collecting debts'' is interpreted. We do not regard this latter

difference as significant. Neither Act excludes attorneys. As far as

attorneys are concerned, the requirements are substantially similar and

the level of protection afforded by the Maine Act is essentially the

same as that of the FDCPA.

5. Enforcement of Security Interests

Section 11002.6 of the Maine Act includes within the definition of

``debt collector'' any person regularly engaged in the enforcement of

security interests. According to the Applicant, this includes persons

who have engaged in this activity more than five times in the current

or previous calendar year. The definition expressly excludes persons

who routinely retrieve collateral when a person has voluntarily

surrendered possession. Similarly, the FDCPA's definition of ``debt

collector'' (Section 803 (6) (A)) includes any ``person * * * in any

business the principal purpose of which is the enforcement of security

interests.''

The Maine Act is more specific than the FDCPA and arguably more

strict since it would expressly include persons enforcing security

interests as infrequently as six times per year, whether or not that

activity is the ``principal purpose'' of the business, as set forth the

in FDCPA. Additionally, the FDCPA has never been interpreted to include

parties who are hired simply to ``pick up'' collateral. The coverage of

the Maine Act in this area is at least equal to, and probably greater

than, that of the FDCPA. Thus, the level of protection provided is also

at least equal to, and probably greater than, that provided by the

FDCPA.

6. Repossession Activity

Section 11017 of the Maine Act defines how repossession is to take

place and requires (1) that the debt collector/repossessor take

inventory of any unsecured property that it acquires along with the

repossessed property; and (2) that it notify the consumer that the

unsecured collateral will be available at the consumer's convenience.

There is no comparable definition in the FDCPA. Since Section 11017 of

the Maine Act places additional requirements on the debt collector to

supply information to the consumer, it provides greater protection to

the consumer in this area than does the FDCPA.

7. Conclusion

These comparisons reveal that the definitions of terms in the Maine

Act as a whole import the same meaning and have the same application as

those prescribed by Sections 803-812 of the FDCPA, in accordance with

Section 901.4(a) (1) of the Procedures. Therefore, as a whole, they

function to provide substantially similar or greater protection to

consumers than do the analogous definitions in the FDCPA.

B. Acquisition of Location Information (Section 804 of the FDCPA;

Section 11011 of the Maine Act)

Section 11011 of the Maine Act is virtually identical to Section

804 of the FDCPA; therefore, its requirements are ``substantially

similar'' to those in the FDCPA and debt collectors' obligations and

prohibitions under the Maine Act are the same as those prescribed in

the FDCPA, as mandated by Sections 901.4(a) (3) and (4) of the

Procedures.

C. Debt Collection Communications (Section 805 of the FDCPA; Section

11012 of the Maine Act)

Section 805 of the FDCPA and Section 11012 of the Maine Act are

virtually identical, with the exception of non-substantive language

differences and dissimilar references to related state and federal

laws. Thus, Maine's requirements in this area also meet the

``substantially similar'' test and debt collectors' obligations and

prohibitions under the Maine Act satisfy the requirements of Sections

901.4(a) (3) and (4) of the Procedures. Section 11012 of the Maine Act

also satisfies Section 901.4(a)(6) of the Procedures since the

consumer's cease communication rights

[[Page 66975]]

under that Section are the same as those in Section 805(c) of the

FDCPA.

D. Harassment and Abuse (Section 806 of the FDCPA; Section 11013.1 of

the Maine Act)

1. Publication of Debtor Lists

Like Section 806(3) of the FDCPA, Section 11013.1.C of the Maine

Act prohibits publication of lists of consumers who refuse to pay

debts. Both state and federal laws, however, except publications to

consumer reporting agencies or persons meeting the requirements of

their respective credit reporting acts, as defined in Sections 603(f)

or 604(3) of the federal Fair Credit Reporting Act (``federal FCRA'')

for the FDCPA and Title 10 of the Maine Fair Credit Reporting Act

(``Maine FCRA'') for the Maine Act.

The definition of a consumer reporting agency (Section 603(f),

federal FCRA; Section 1312.9, Maine FCRA) and the parties who have a

permissible purpose to receive the lists at issue (Section 604(3),

federal FCRA; Section 13121.33, Maine FCRA) are essentially the same in

both statutes. In fact, the Maine FCRA is based upon, and was designed

to supplement, the federal FCRA.\7\ Since the definitions are the same,

the limits on distribution of debtor lists are also the same. Thus, the

state law referenced in Section 11013.1 of the Maine Act is

substantially similar to Sections 603(f) and 604(3) of the federal

FCRA; it follows that the Maine Act's reference to the Maine FCRA does

not adversely affect the level of protection afforded by the Maine Act

as compared to Section 806(3) of the FDCPA.

\7\ Maine points out that in most cases in Maine FCRA is more

restrictive than the federal FCRA. The Maine FCRA (1) limits the

cost of credit reports; (2) limits the time in which a credit

reporting agency must investigate and verify or delete trade lines;

and (3) requires compliance by any credit reporting agencies serving

users in the State of Maine. The law also requires registration of

credit reporting agencies operating within the State.

---------------------------------------------------------------------------

2. Reports to Consumer Reporting Agencies [Sections 806(3) and 807(8)

of the FDCPA; Section 11013.4 of the Maine Act]

There is nothing in the FDCPA that prohibits a collection agency

from reporting credit information to a consumer reporting agency. As

discussed above, Section 806(3) expressly permits distribution of

debtor lists to credit bureaus; Section 807(8) prohibits the

communication of false credit information and requires that a disputed

debt be reported as disputed. The Maine Act contains the same

prohibitions. In addition, however, Section 11013.4 of the Maine Act

prohibits a debt collector from reporting a debt solely in its own name

and requires instead that the name of the original creditor also be

included. The FDCPA contains no comparable requirement. The additional

Maine provision is designed to allow consumers who review their credit

reports to determine the source of a listed trade line rather than

require them to contact the collection agency to determine the identity

of the original creditor. Thus, the provision makes it easier for

consumers to verify the existence of debts as well as the parties to

whom they are owed. It provides greater protection in this area than

does the FDCPA.

3. Shame Automobiles and Shame Cards

Section 11013.1G. of the Maine Act specifically prohibits the use

of shame cards, shame automobiles and similar devices.\8\ Section 806

of the FDCPA contains no comparable prohibition. In all other respects.

Section 11013.1 of the Maine Act and Section 806 of the FDCPA are

identical. Thus, to the extent that ``shame'' devices are still in use,

the Maine Act arguably provides greater protection in this area than

does the FDCPA.

\8\ A shame car is an automobile with the name of the collection

company emblazoned on the door that is parked in front of the

debtor's residence and left there. A shame card is a calling card

containing the name of the collection agency that is left posted on

the debtor's door or other conspicuous spot that can be observed by

others.

---------------------------------------------------------------------------

4. Compliance With Section 901.(4)(a) of the Procedures

The obligations and prohibitions applicable to debt collectors

required by Section 806 of the FDCPA are substantially the same as

those required by Section 11013.1 of the Maine Act. Therefore, Sections

901.4(a)(3) and (4) of the Procedures are satisfied.

E. False and Misleading Representations (Section 807 of the FDCPA;

Section 11013.2 of the Maine Act)

The two Acts prohibit the same false, deceptive or misleading

representations in the same manner except for the following:

1. Reference to the Maine Consumer Credit Code

Both Section 807(6) of the FDCPA and Section 11013.2.F(2) of the

Maine Act address false representations of the effect of a sale or

transfer of interest in a debt on the consumer. The two provisions are

the same, except that the Maine Act refers to practices prohibited by

Title 9-A of the Maine Consumer Credit Code and the FDCPA does not.\9\

Title 9-A of the Maine Consumer Credit Code prohibits a number of

actions that are not prohibited by the FDCPA, including confessions of

judgment, post-dated instruments, use of cross-collateral and wage

assignments. These and other similar provisions all inure uniquely to

the benefit of consumer-debtors in the State of Maine. Reference to

these practices in Section 11013.2.F(2) of the Maine Act, therefore,

provides an added measure of protection not present in Section 807(6)

of the FDCPA.

\9\ The Maine Act prohibits: The false representation or

implication that a sale, referral or other transfer of any interest

in a debt shall cause the consumer to: (1) Lose any claim or defense

to payment of the debt; or (2) Become subject to any practice

prohibited by the Act or the Maine Consumer Credit Code, Title 9-A.

(Emphasis added.) The FDCPA is the same except for the underlined

portion.

---------------------------------------------------------------------------

2. Reference to Maine Fair Credit Reporting Act

Section 11013.2.P. of the Maine Act prohibits the false

representation or implication that a debt collector operates or is

employed by a ``consumer reporting agency,'' as defined by Title 10,

Section 1312, Subsection 4, of the Maine Fair Credit Reporting Act.

Section 807(16) of the FDCPA contains identical language, except that

it refers to a ``consumer reporting agency'' as defined by the federal

Fair Credit Reporting Act, 15 U.S.C. 1681a(f). As discussed previously,

the definitions of ``consumer reporting agency'' in both the Maine Act

and FDCPA are basically the same and the term has the same meaning in

both statutes.\10\ Thus, Section 11013.2.P. of the Maine Act is

substantially similar to Section 807(16) of the FDCPA.

\10\ The definition of ``consumer reporting agency'' in the

Maine Act refers to ``investigative consumer reports'' as well as

``consumer reports'' while the definition in the FDCPA refers only

to ``consumer reports.'' For these purposes, they are the same.

---------------------------------------------------------------------------

3. Compliance With Section 901.4(a) of the Procedures

Section 807(11) requires that debt collectors clearly disclose the

nature and purpose of all communications made to collect a debt. The

Maine Act contains an identical requirement. Since the same

notification is mandated by both Acts, Section 901.4(a)(2) of the

Procedures, which requires that all notifications be the same, is

satisfied insofar as Section 807(11) is concerned. Similarly, since the

FDCPA and the Maine Act are identical in this area, with the exception

of references to state law, Sections 901.4(a) (2), (3) and (4) of

[[Page 66976]]

the Procedures, requiring the same or more stringent notifications,

obligations and prohibitions, are satisfied.

F. Unfair Practices (Section 808 of the FDCPA; Section 11013.3 of the

Maine Act)

Section 808 of the FDCPA prohibits eight specified unfair

practices; the preamble to Section 808 prohibits unfairness generally.

Section 11013.3 of the Maine Act prohibits precisely the same practices

as the FDCPA, plus several additional practices that are not included

in the FDCPA,\11\ and also contains a general prohibition against

unfairness. The inclusion of several additional practices in the Maine

Act increases the level of protection provided by the Maine Act, as

compared with the FDCPA. As such, the Maine Act provides for more

extensive obligations and more stringent prohibitions in this area than

does the FDCPA, in compliance with Sections 901.4(a)(3) and (4) of the

Procedures.

\11\ These include use of a notary to collect, commingling the

funds of the debt collector and its client, failing to return

collected funds to the creditor, and soliciting loans to pay a debt.

---------------------------------------------------------------------------

G. Debt Validation (Section 809 of the FDCPA; Section 11014 of the

Maine Act)

Section 809 of the FDCPA requires disclosure of the amount of the

debt and the creditor, and requires a validation notice. It also

requires the debt collector to verify the debt if the consumer disputes

it within thirty days. Section 11014 of the Maine Act is identical.

Section 901.4(a)(2-4) of the Procedures, requiring that all applicable

notifications, obligations and prohibitions be the same or more

stringent, are satisfied since the requirements are identical.

Therefore, the protection they provide is ``substantially similar.''

H. Multiple Debts (Section 810 of the FDCPA; Section 11015 of the Maine

Act)

Section 810 of the FDCPA directs debt collectors to apply payments

for multiple debts in accordance with the directions of the consumer.

Section 11015 of the Maine Act is identical. Those requirements are,

therefore, also ``substantially similar'' and the protection they

provide is the same. In the same manner, Sections 901.4(a)(3), (4) and

(6) of the Procedures are satisfied.

I. Legal Actions by Debt Collectors (Section 811 of the FDCPA; Section

11013.3.N of the Maine Act)

Section 811 of the FDCPA permits debt collectors to bring legal

actions against consumers, but only in certain venues.\12\ Section

11013.3.N of the Maine Act prohibits debt collectors from instituting

suit in their own names or on behalf of others in any venue. Since no

suits are permitted, no venue provisions are appropriate. Since the

Maine Act insulates consumer from debt collector lawsuits in Maine, the

Maine Act provides greater protection to consumers than does the FDCPA,

which permits them. The fact that no suits are permitted also means

that the obligations and prohibitions applicable to debt collectors in

Maine are more stringent than those contained in the FDCPA, in

compliance with Sections 901.4(a)(3) and (4) of the Procedures.

\12\ Proper venues are where the real property is located or, if

no real property is involved, where the consumer lives or signed the

contract.

---------------------------------------------------------------------------

J. Furnishing Deceptive Forms (Section 812 of the FDCPA; Section 11016

of the Maine Act)

Section 812 of the FDCPA prohibits furnishing collection forms,

knowing that they would be used to create a false impression that a

third party is involved in the collection of the debt. Section 11016 of

the Maine Act is identical. Since both statutes are substantively the

same, Sections 901.4(a)(3) and (4) of the Procedures are satisfied and

the level of protection provided to Maine consumers by the Maine Act is

the same as that provided by the FDCPA.

K. Civil Liability (Section 813 of the FDCPA; Section 11054 of the

Maine Act

Section 901.6(d) of the Procedures specifies that no exemption

shall extend to the civil liability provisions of Section 813 of the

FDCPA, which authorizes aggrieved consumers to sue debt collectors that

violate the Act privately. Therefore, Section 813 of the FDCPA is not

included within the scope of the exemption granted by the Commission in

response to Maine's request.\13\

\13\ The civil liability provisions of Section 11054 of the

Maine Act are identical to those in Section 813. This is also true

for the statute of limitations provided in Section 11054.4 of the

Maine Act (one year) which is the same as that provided in Section

813(d) of the FDCPA for private suits.

---------------------------------------------------------------------------

L. Compliance With Sections 901.4(a)(5) and (6) of the Procedures

Section 901.4(a)(5) and (6) require that (1) the obligations and

responsibilities of consumers be no more costly, lengthy or burdensome

under the Maine Act than they are under the FDCPA; and (2) consumers'

rights and protections be substantially similar to or greater under the

Maine Act than those provided by the FDCPA. The Commission has already

determined that the protections provided by the Maine Act are the same

or greater than those provided by the FDCPA. In addition, consumers

must do nothing more under the Maine Act to receive these protections

than they do under the FDCPA. Therefore, the Commission determines that

the obligations and responsibilities of consumers under the Maine Act

are no greater than those imposed by the FDCPA. Thus, the Maine

application complies with Sections 901.4(a)(5) and (6) of the

Procedures.

M. Conclusion

Comparison of Sections 803-812 of the FDCPA with pertinent portions

of the Maine Act supports the following findings which meet the minimum

requirements of Section 901.4(a) of the Procedures: (1) Definitions and

rules of construction in the two laws import the same meaning and have

the same or similar application; (2) Debt collectors provide all

applicable notifications required by the FDCPA under the Maine Act; (3)

Debt collectors are required by the Maine Act to take affirmative

actions and abide by obligations that are substantially similar to

those required by the FDCPA within the same or similar time periods;

(4) Debt collectors must abide by the same or more stringent

prohibitions under the Maine Act as those under the FDCPA; (5)

Obligations and responsibilities of consumers under the Maine Act are

no more costly, lengthy or burdensome than those under the FDCPA; and

(6) The rights and protections of consumers under the Maine Act are

substantially similar to or more favorable than those provided by the

FDCPA. Therefore, the provisions of the Maine Act in general are

substantially similar to, or provide greater protection than, the

provisions of the FDCPA.

II. Enforcement of the Maine Act Is Adequate

In order for an exemption to be granted pursuant to Section 901.6

of the Procedures, the Commission must find that provisions for

enforcement of the Maine Act by the State are adequate. In order to

make this finding, the Commission must determine that the Maine Act

makes sufficient provision for: (1) Administrative enforcement,

including the necessary facilities, personnel and funding; (2) civil

liability under Section 813 for failure to comply; and (3) a statute of

limitations for civil liability of similar or longer duration than that

in Section 813 of the FDCPA.\14\

\14\ Procedures, Section 901.4(b). See also footnote 13. The

civil liability provisions and corresponding statute of limitations

for private suits are the same.

[[Page 66977]]

---------------------------------------------------------------------------

A. Authority

Section 814 of the FDCPA authorizes the Commission to exercise all

its functions and powers under the Federal Trade Commission Act in

enforcing the FDCPA. A violation of the FDCPA constitutes an unfair or

deceptive act or practice in violation of the Federal Trade Commission

Act. The Federal Trade Commission Act authorizes a civil penalty of up

to $10,000 for each violation of the FDCPA done with actual or implied

knowledge of the FDCPA. Additionally, the Commission is empowered to

seek various forms of injunctive relief, as appropriate. The Statute of

limitations for actions brought by the Commission against debt

collectors is five years. 28 U.S.C. 2462.

Under the FDCPA, the Commission has no licensing or other

regulatory powers and cannot ``promulgate trade regulation rules or

other regulations with respect to the collection of debt collectors * *

*.'' \15\ Nor does the Commission have the power to pursue criminal

liability or impose criminal penalties for FDCPA violations. The

Commission's jurisdiction extends to any debt collector, as defined,

located in the United States.

\15\ Section 814(d), FDCPA.

---------------------------------------------------------------------------

Subchapters III and IV of the Maine Act govern the licensing of

Maine's debt collectors as well as the administration and enforcement

of the Maine Act. In fact, a significant portion of Maine's authority

to administer and enforce its debt collection law lies in its licensing

power. No debt collector may conduct business in the State without a

license, which must be renewed every two years. In order to get a

license, a debt collector must submit financial statements and

references and agree to an investigation of its personnel and business

practices. Changes in ownership or management require a new

license.\16\ Licensees must be bonded.\17\ The State is responsible for

the safety and soundness of licensed debt collectors, as well as for

subsequent management if they become insolvent, much like a

receiver.\18\ Unlicensed debt collectors operating in the State are

subject to criminal penalties.\19\

\16\ Section 11031, Subchapter III, Maine Act.

\17\ Section 11032, Subchapter III, Maine Act.

\18\ Section 11038, Subchapter III, Maine Act.

\19\ Section 11040, Subchapter III, Maine Act.

---------------------------------------------------------------------------

The State may make rules, in addition to those in the Maine Act,

pertaining to the operation of a debt collector's business to safeguard

the public interest \20\ and may issue ``advisory rulings'' concerning

the Maine Act.\21\ All form letters used by licensed debt collectors in

Maine must be approved by the State. Additionally, consumers must be

able to contact licensed Maine debt collectors at least 20 hours per

week.

\20\ Section 11034, Subchapter III, Maine Act.

\21\ Section 11035, Subchapter III, Maine Act.

---------------------------------------------------------------------------

The Maine Act authorizes the State, through the Maine Attorney

General, to bring an action for civil penalties, not to exceed $5,000

per count, against any person who willfully violates the Maine Act, no

more than two years after the violation occurred.\22\ Additionally, the

State may, after appropriate investigation and examination of a

licensee's records, file a complaint with the State's administrative

court to suspend or revoke a debt collector's license for violation of

the Maine Act.\23\ There is no statute of limitations for a license

revocation proceeding. Finally, the State may also seek injunctive

relief, as appropriate.\24\

\22\ Section 11053, Subchapter III, Maine Act.

\21\ Section 11052, Subchapter III, Maine Act.

\21\ Maine Rules of Civil Procedure Sec. 65 (1967).

---------------------------------------------------------------------------

While the civil penalties authorized by the Maine Act are smaller

than those authorized by the FDCPA and the statute of limitations for

actions brought by the State of Maine is shorter, there are also

significant strengths in the Maine Act that are not present in the

FDCPA. Overall, we believe that the strengths more than offset the

weakness to meet the test of adequacy in Section 817 of the FDCPA.

Principal in Maine's enforcement powers is its ability to suspend

or revoke a debt collector's license, effectively putting the collector

out of business in the State. There is no comparable power granted in

the FDCPA. In addition, the State can proceed against a debt collector

for civil penalties (albeit not as large as available under the FDCPA)

and injunctive relief and can criminally prosecute a debt collector for

operation without a license, which can result in a jail term. The

latter remedy also has no counterpart in the FDCPA. Maine's general

supervisory powers are also more extensive than the Commission's

powers. Aside from the State's investigatory authority in determining

whether to issue a license, it is responsible for monitoring the

financial stability of its licensees and may issue additional rules and

regulations governing their conduct--a power specifically denied the

Commission by Section 814(d) of the FDCPA.

Typically, the State takes action against an offending debt

collector fairly quickly after a violation is discovered.\25\ Because

of this, the average civil penalty recovered by the State is only

$1,000-1,500. Time-consuming investigations are rare; one or two

violative letters often trigger the commencement of an inquiry. Because

the State takes a ``hands-on'' approach to enforcement, an inquiry can

often be resolved expeditiously before much damage is done. This is an

extra benefit to the public and is in contrast to the more extensive

investigations pursued by the Commission where larger penalties are

usually more appropriate. We do not believe that the State's more

limited civil penalty authority and shorter statute of limitations

significantly impede its ability to enforce the Maine Act. Given its

other powers and the speed of its investigations, the State's overall

enforcement authority and effectiveness appear to be at least as great

as that possessed by the Commission in administering and enforcing the

FDCPA.

\25\ Interview, William Lund, Superintendent, Maine Bureau of

Consumer Credit Protection, September 6, 1994.

---------------------------------------------------------------------------

B. Personnel and Facilities

The FDCPA is administered and enforced primarily by the staff of

the Division of Credit Practices in the Bureau of Consumer Protection.

Enforcement actions are typically pursued not only by headquarters

staff but also by regional office personnel. At any given time, the

Commission has several debt collection matters in investigative stages

or in the courts. Like other Commission staff, attorneys working on

debt collection cases have the resources of the federal government from

which to draw support.

The Bureau of Consumer Credit Protection in the State of Maine

enforces the Maine Act, Maine's Fair Credit Reporting Act and the Maine

Consumer Credit Code. The Bureau is staffed by fifteen employees,

including office staff, plus five field examiners. Its examiners review

collection agency practices and conduct investigations for the purpose

of licensing collection agencies. The examiners are trained in

financing and consumer credit and most have employment experience with

banks or mortgage companies. Examiners also attend a school for

examiners conducted by the National Association of Consumer Credit

Administrators to learn both state and federal debt collection

statutes. Examiner trainees accompany experienced examiners for an

eight month period of on-the-job-training. In exercising their

responsibilities, examiners spend about

[[Page 66978]]

fifteen percent of their time enforcing the Maine Act. Debt collector

licensing is also the primary responsibility of the Superintendent and

Deputy Superintendent of the Bureau of Consumer Credit Protection.

The Maine Bureau reviews the financial posture of collection firms

applying for licenses and handles numerous written debt collector

complaints each year, along with hundreds of telephone complaints and

questions. Three additional individuals in the office (consumer

assistance specialists) are trained to respond to these inquiries about

the activities of debt collectors, with regard to both federal and

state debt collection law; they also routinely petition the

administrator to initiate enforcement proceedings to deal with

suspected violations of the Maine Act. The agency has been involved in

at least four court actions in the past two years relating to

unlicensed practice or license revocation. In addition, the Maine

Bureau has obtained voluntary Assurances of Discontinuance from ten

debt collectors during the same time period. The Maine Bureau publishes

its enforcement actions and mails the information to all licensed

companies as a deterrent to further violative practices.

All license fees and examination reimbursement costs accrue to the

agency as dedicated revenue within the State's budget process. In

addition, a portion of creditor and lender ``volume fees'' based upon

the amount of consumer credit extended is also dedicated to enforcement

activities of the Maine Bureau, on the theory that the hiring of

collection agencies by consumer creditors justifies the funding by

those creditors of a portion of the cost of regulating them.

Approximately $100,000 of the Maine Bureau's total budget of $800,000

is derived from sources of revenue related to debt collection activity

and directed toward enforcement of the Maine Act.

Thus, the personnel, facilities and funding devoted to

administering and enforcing the Maine Act are comparable to the

resources expended by the Commission in enforcing the FDCPA. The fact

that these resources will be directed at the activities of debt

collectors in one state supports Maine's contention that it will have a

greater enforcement presence in the State of Maine under the Maine Act

than the Commission does nationally under the FDCPA.

C. Conclusion

After consideration of the facilities, personnel and funding

devoted to administrative enforcement of the Maine Act and the Maine

Act's provisions for civil liability and appropriate statutes of

limitations for both private and governmental actions, the Commission

finds that provisions for enforcement of the Maine Act are adequate, as

required by Section 901.4(b) of the Procedures.

Action Taken

Based on the submissions of the Maine Bureau of Consumer Credit

Protection in support of its request for an exemption and upon the

comments received, the Commission concludes that the Maine Act is

substantially similar to, and in some instances provides greater

protection than, the FDCPA and contains provisions for adequate

enforcement. As such, it meets all of the criteria set forth in Section

901.4 (a) and (b) of the Procedures. The Commission has granted to the

State of Maine an exemption from Sections 803-812 of the FDCPA for debt

collection practices conducted within the State on that basis, in

accordance with Section 817 of the FDCPA. The exemption will remain in

effect as long as state law continues to afford substantially

equivalent protection to that of the FDCPA.

To ensure that the conditions for an exemption continue to be met,

the State of Maine must provide notice to the Commission of any change

in its law, policies or procedures, including court decisions, that

would significantly affect whether the state law continues to afford

substantially equivalent protection and whether the State is

effectively enforcing the Maine Act. In any event, the State of Maine

must provide a report to the Commission not later than two years after

the date this exemption becomes effective, and every two years

thereafter, concerning the manner in which the State has enforced its

law. The Commission reserves the right to revise this reporting

requirement at a later date if circumstances warrant or to request

additional information as needed.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 95-31316 Filed 12-26-95; 45 am]

BILLING CODE 6750-01-M