|Date: Tue, Mar 28, 2000 11:10 PM
Re: Gramm-Leach-Bliley Act Privacy Rule, 16 CFR Part 313
I write as an attorney and a member of the Commercial Law League to urge the Commission to revise the Proposed Rule referenced above to expressly exclude debt collection agents from the definition of "financial institution." A correlative revision is also required to ensure that the interaction between collection agents and account debtors is not subject to an interpretation that a "customer relationship" exists.
One cannot imagine a proposed rule more at odds with the reality of the debt collector-creditor relationship. By no stretch of the imagination can it be said that a debtor is a "customer" of the debt collector. By the time a debt gets to an attorney, litigation is the intended course of action an adversarial relationship; and one, by the way, where the disciplinary rules of every state require the lawyers allegiance to his or her client, the creditor.
Along with my colleagues, my concern is that the Proposed Rule allows an interpretation of the Act that defines third party debt collectors as "financial institutions" whose interactions with consumers constitute "customer relationships," thereby triggering the full panoply of notice requirements. The proposed definition of a "financial institution" appears to include debt collection agents and, contrary to the Commissions express belief, the broad definition of "customer relationship" lends itself to being applied to debt collection agents.
The Commissions clear guidance now would avoid extensive litigation and the potential expansion of liability for debt collection agents similar to that which occurred under the Fair Debt Collection Practices Act ("FDCPA"). A clear exception for debt collection agents is imperative under the Proposed Rule because, unlike the FDCPA, the Act is not intended to apply to the interactions between collection agents and account debtors.
The driving force behind the Act is consumer choice. The notice requirements with respect to privacy policies are intended to allow potential customers the opportunity to review, in advance, the policies of a financial institution and to make an informed choice as to which financial institution they will patronize.
The relationship in the context of debt collection, which may be characterized only as adversarial, simply does not arise in this manner. The only role the account debtor plays in the process is in creating the delinquency; the freedom to select from among various collectors is not a choice that is available to the account debtor. Informed, voluntary decisions are wholly removed from the process once the financial institution enlists the services of a collection agent to enforce payment obligations on a past due account. Inherent in this process is finality, not continuity, which aptly demonstrates that an express exception for collection agents is essential.
It is also important that consideration be given to the effect of the Proposed Rule on attorneys whose practice includes debt collection. Attorneys as debt collectors certainly must be excepted from the Proposed Rules expansive definition of a financial institution. Law firms are not financial institutions and no stretch of the imagination can interpret them as being so. Moreover, a customer relationship simply cannot exist between the attorney and the account debtor because such an interpretation would be at odds with state ethical rules governing attorneys, whose duty it is to zealously represent the entity to whom a debt may be owed. Imposing on an attorney a concurrent duty to the adversary of the client creates, by statute, an impermissible conflict of interest, particularly since the attorneys ethical obligations may require otherwise impermissible disclosure in order to advocate the clients interest.
In conclusion, the Commission should give further consideration to the Proposed Rule and its effect on collection agents. At a minimum, the Commission should consider the intended and practical consequences on debt collection agents generally and attorneys in particular.
Thank you for this opportunity to comment.
Very truly yours,
John E. Codrea