New State Debt Collection Law Unintentionally Closes Check Program

The district attorney in Lane County, Ore. said recently that his office’s check diversion program will shut down because of a new debt collection law set to take effect January 1. The DA believes the new law would make check collection more expensive and potentially expose the office to FDCPA lawsuits.

Alex Gardner — DA for Oregon’s four largest county, which includes the city of Eugene — said that the language of the new law would largely define bad check as consumer debt, placing it under the authority of the Fair Debt Collection Practices Act (FDCPA).

“If there’s even a 20 percent chance we might fall afoul of the [FDCPA], then we simply can’t risk it,” Gardner told local paper The Register-Guard. “We can’t afford to litigate this.”

Gardner also believes that the restrictions would increase the cost to run the program.

The new law in question, SB 525, was passed in July of this year. Specifically, the bill makes the use of the name, seal, or letterhead of a public agency or public official by a debt collector an unlawful collection practice. Originally, the bill targeted district attorneys, but the language was changed to the more broad “public agency or public official” in the House.

The bill does create a framework for district attorneys’ offices to create check diversion and collection programs, but limits what practices can be used in the programs. That provision has caused disagreement in the potential impact of the law.

State Senator Floyd Prozanski (D-Eugene) said he was taken aback at Gardner’s announcement.

“I’m kind of surprised by the press release (announcing Gardner’s decision),” Prozanski told The Register-Guard. “It’s unfortunate he’s taking the position he’s taking, because we worked hand-in-hand with him in putting SB 525 together.”

Prozanski noted that he worked with DAs, including Gardner, on the language of the bill. He said the main intent of the changes was to make sure people receiving collection letters knew who they were dealing with and that collection companies weren’t masquerading as law enforcement officials. He said didn’t expect the change to have any other side effects.