On April 13, 2020, The Wisconsin Department of Financial Institutions (“WI DFI”) released a guide titled “Emergency Guidance on Prohibited Debt Collection Practices,” along with a cautionary, interpretive letter issued from the WI DFI to a debt collector meant to serve as an example of impermissible practices. The perceived intent of the guide is to encourage debt collectors to act reasonably during the current pandemic, and also to warn of the debt collection practices that are prohibited by the Wisconsin Consumer Act.
The guide specifically references Wis. Stat. §427.104(1)(h), which provides that in attempting to collect an alleged debt arising from a consumer credit transaction that it is a prohibited practice to “[e]ngage in other conduct which can reasonably be expected to threaten or harass the customer or a person related to the customer.” The guide further discusses the hardship many customers are facing as a result of lost wages due to loss of employment, and how these individuals are making tough decisions on how to allocate their available funds.
The guide states practices which may have been typical or customary under normal conditions may be deemed harassment under conditions of the global pandemic. The guide specifically emphasizes the practice of using phone calls as an attempt to collect a debt, and how this practice may face greater scrutiny in the context of the new conditions we are experiencing. The guide forewarns that in the current economic climate, the Wisconsin Consumer Act will act to deter prohibited debt collection practices, and that violations of this Act may be met with severe consequences, including punitive damages and damages for mental anguish and emotional distress.
From a practical standpoint, this warning should be heeded, but permissible debt collection efforts may continue. Creditors are encouraged to proceed cautiously, even after the global pandemic subsides. The customer should always be treated with respect, but in the current climate, creditors are wise to take special precaution with customers who disclose a financial hardship. As your creditors’ rights law firm, KWA is committed to treating all consumers with kindness and respect. Before this pandemic occurred, our collectors were trained to listen the customer’s concerns and avoid aggressive or harassing debt collection tactics. It is not only the law, but the right thing to do. Due to recent events, the firm has provided additional instruction to its collectors to minimize risk for its clients and itself. Using reasonable collection strategies during this pandemic, such as reduced or delayed payment plans, provides the hardship relief some consumers need right now while still encouraging consumers to be accountable and repay their defaulted obligations to you, our clients.
If you have questions regarding this guidance from the Wisconsin Department of Financial Institutions, how the firm has adjusted its collection techniques, or any other matter, please feel free to contact us.