Legislation designed “to eliminate abusive practices” by debt collectors through regulations “to ensure the fair and equitable treatment of consumers during the collection process”, is bound for the House of Assembly.

In a Ministerial Statement made on Friday, Home Affairs Minister Walton Brown updated MPs on the planned amendments to Bermuda’s Consumer Protection Act 1999.

The proposed Fair Debt Collection Practices Act, will govern debt recovery practices, which “require oversight and regulations to ensure the fair and equitable treatment of consumers during the collection process”.

“The Fair Debt Collection Practices will cover all household, family, and personal debts. These include credit card debt, auto loans, personal loans, medical bills and mortgages. The Fair Debt Collection Practices will not regulate debt generated while running a business,” said Minister Brown.

“Historically, consumer transactions were presumed fair because it was assumed that buyers and sellers bargained from equal positions of power.”

But he said: “Complaints by consumers, however, demonstrate that they are inherently at a disadvantage especially in the areas of consumer debt and the collection of that debt.

“When debt is created, it has a financial impact on the spending of consumers and businesses with both short-term and long-term implications. Where debt has to be carried by a business, it is likely to contribute to the inflation of the price for goods and services. When debt is owed by the consumer, it slows consumer spending and hinders the ability of the consumer to function normally in society.”

Businesses owed money, “otherwise known as creditors”, have the legal right to take certain steps “to collect that money”. The Minister also noted that many creditors “handle the collection process in-house, although the collection may be assigned to a debt collector or a collection agency”.

But he said: “The legal right to collect money must be fair and equitable and not include practices which are abusive.”

He also provided the following list of a few examples of what will be included in the legislation:

  • Verification of Debt – Requiring proper documentation to verify the debt owed; allow for the debtor to review the paperwork from the creditor verifying the debt owed; and ensure proper accounting of debt and interest repayments;
  • Predatory Lending – Eliminating excessive interest rates and penalties that cause or is likely to cause substantial injury to the consumer;
  • Misrepresentation or Deceit – Preventing a debt collector from making false statements to a debtor or in any way use deceit in his or her attempt to collect the debt. This includes misrepresenting himself as a law enforcement officer or a barrister;
  • Harassing Phone Calls – Preventing a debt collector from calling any debtor repeatedly or increasingly with the intent to harass, annoy, or abuse the person;
  • Use of Deceptive Documents – Prohibiting creditors or debt collectors from sending any documents intentionally designed to look like official court documents or documents from any governmental agency;
  • Misrepresentation of the Debt Amount – Prohibiting a debt collector from misrepresenting the amount that is not permitted by the original contract, or by application of law; and 
  • Communication with Third Parties – Forbidding creditors and debt collectors to give false information about the debtor to anyone, and from discussing the debtor or debt with any third party.

Minister Brown concluded: “It is a statement of fact that business and consumers need each other in order to enjoy a good quality of life. When that balance is being undermined by predatory lending, the Fair Debt Collection Practices legislation will ensure accountability by all parties who engage in the process of credit.”