Although the federal Fair Debt Collection Practices Act strongly regulates the debt collection industry, states generally also have laws protecting consumers against unscrupulous debt collectors. In August, North Carolina’s legislature passed S974 (Rand), also known as the “Consumer Economic Protection Act of 2009. The bill was sent to the governor for signature on August 7. If signed, it would go into effect in October 2009.

This bill strengthens consumer protections, most notably by redefining “collection agency” to include debt buyers - those individuals and companies that purchase debt already written off as a loss by original creditors. But the bill goes further, by mandating that debt collectors provide consumers with receipts for any type of payment (rather than just a cash payment). It also prohibits collectors from suing a consumer or initiating arbitration when they know (or should know) that a debt is past the statute of limitations. It also makes it illegal to try and collect a debt without valid documentation that the buyer is the owner of the debt and verification of the amount of the debt. If a debt collector does take legal action against the consumer, default or summary judgment can’t be granted without the collector supplying the original account number, the original creditor, the amount of the original debt, an itemization of charges and fees claimed to be owed, the original charge-off balance, an itemization of post charge-off additions, the date of the last payment, and the amount of interest claimed and the basis for the interest charged.

The bill also raised the penalties for debt collectors who break the law. Now, the penalty is a minimum of $500 and a maximum of $4,000 for each violation.

To read the bill in its entirety, click here.