Proposed bill would require debt buyers to prove that a person owes the debt if they want to sue

The Minneapolis Star-Tribune recently ran a story about a draft bill in the Minnesota Legislature that would require debt buyers that sue people to collect debts to provide various documents that prove the person actually owes the debt. Debt buyers, of course, are companies that buy past-due accounts from the original creditor for pennies on the dollar and then try to make a profit by collecting the debts themselves. Reportedly, the bill proposes a private cause of action and a penalty of up to $2,500 if debt buyers do not provide the required proof.

In response, the collection industry has (predictably) resorted to its favorite scare tactic. The story quotes David Cherner of ACA International, who said that “[b]ased on a preliminary reading, this could have very significant implications as to the flow of credit to consumers.” What Cherner doesn’t explain is how regulating debt buyers–who by definintion don’t issue credit themselves–would impact the availability of consumer credit one iota.

This legislation is a step in the right direction. As usual, though, the devil will be in the details. It remains to be seen exactly what documents will be required. For example, will a mass-produced affidavit be enough? Will a single billing statement, produced long after the account became delinquent be enough? I’ll be watching closely in the coming months as these details get fleshed out.

Bill helps consumers against debt buyers | Star-Tribune | February 10, 2010