Collecting in the Time of COVID: Senate Bill 3565


By: Cassie Nielsen, Associate


In the wake of the COVID-19, businesses small and large face not only the difficult task of collecting their own receivables but also the threat of external debt collection.  Whether proverbial predator or prey, Senate Bill 3565 aims to curb, if not prohibit, debt collection during the present national emergency.  If successful, the bill would expand the protections afforded under the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et. seq.) (“FDCPA”) to include small businesses while imposing sweeping prohibitions against the collection of consumer and commercial debt during national crises.


Introduced by Senator Sherrod Brown (D-OH), the “Small Business and Consumer Debt Collection Emergency Relief Act of 2020” seeks to temporarily curb collection practices against both consumers and “small business(es),” as defined in section 3 of the Small Business Act, during the period running from one (1) day before the declaration of any national disaster/emergency to one hundred twenty (120) days after the expiration of such declaration (the “Disaster Period”).  Such represents a significant and unprecedented expansion of the consumer-driven FDCPA into the commercial realm and the first federal regulation regarding commercial debt collection.  During any Disaster Period, the bill expands the definition of “debt” to encompass any obligation that is or becomes due during the Disaster Period which arises from a transaction with a consumer or small business—regardless of whether the primary purpose for the transaction is for “personal, family, or household use.”  Even more substantial is the bill’s amendment of “debt collector” to include any person or entity collecting any debt, including creditors collecting their own debt.  The amended definitions represent a considerable shift in the application of consumer-based protections to commercial law.


As to new restrictions, the bill would prohibit certain actions during any Disaster Period, including:

.            a)  the capitalization of unpaid interest;

           b)  increasing the interest rate on a debt following non-payment of debt (i.e. default rate interest);

           c)  suit or threatening to sue as the result of non-payment of debt;

.            d)  continuation of litigation on a debt which was commenced before enactment of the law;

.            e)  enforcement of a security interest through repossession, limitation of use, or foreclosure;

          f)  commencing or continuation of any wage, bank or asset garnishment against a debtor;

          g)  commencing or continuation of an eviction action; and,

          h)  disconnection or termination of any utility service.


In addition to expanding definitions and prohibited conduct, the bill would require creditors to automatically extend repayment periods while effectively eliminating debt collection communications.  Absent prior consent, only written communication with a debtor would be permitted and such communication must “inform the consumer or small business that the communication is for informational purposes and is not an attempt to collect a debt.”

The bill is before the Banking, Housing, and Urban Affairs Committee and it remains to be seen whether– and in what form – it will be released to the full Senate for consideration.  Although certainly well meaning, the bill arguably represents a “knee-jerk” reaction which threatens the entire commercial collections industry and which fails to take into consideration the myriad protections and remedies presently offered to those facing debt collection.  If nothing else, the bill may well be the first effort in what could be a growing, overall trend to expand restrictions and corresponding protections under the FDCPA.

DISCLAIMER: These materials are intended for general informational purposes only.  Accordingly, they should not be construed as legal advice or legal opinion on any specific facts or circumstances. Instead, you are urged to consult counsel on any specific legal questions you may have concerning your situation.