[LSDEMS] 3rd policy draft released: Fair Debt Enforcement and Collection

[Midsummer Night's Dream]

 

 

 

INTRODUCING:  FAIR DEBT ENFORCEMENT AND COLLECTION

 

 

 

In our manifesto, we promised government reform.  As part of our reform package, we are introducing legislation to implement: protections for tenants, consumer rights, freedom of information, regulating financial advice and providing protection to those who give money for investment purposes -- among other things.  We have also adopted the practice of creating legislative advisory notes as one way to improve transparency. (Details regarding this practice can be found at https://www.ls-democrats.com/featured-content/legislative-notes)

 

In this blog post, we introduce to you the Court Awards and Fair Enforcement Act (CAFEA) 2020. 

 

What does CAFEA aim to do?

 

CAFEA's provisions will protect debtors from being subjected to oppressive or unreasonable and endless litigation to collect a debt where the creditor (the person to whom the debtor owes money) acts unreasonably.

 

For instance, let's suppose a debtor owes the creditor $200,000.  The creditor applies to the court to obtain two vehicles which the debtor owns. For our example, one vehicle is valued at $120,000 and the other at $80,000.  Let's suppose the creditor manages to sell and get proceeds of $72,000 on the second vehicle, but sells the first for only $20,000.  Under CAFEA, the creditor could return to court to obtain the remaining $8,000 from the proceeds of the first sale. However, if the creditor acted unreasonably in respect of the second sale, CAFEA prevents him or her from returning to court to obtain the $100,000. Whether or not they acted unreasonably would depend on the facts, but generally if the creditor intentionally lowballs when selling, then CAFEA does not allow them to recover the difference.

 

This prevents unnecessary and endless litigation by requiring the creditor to be reasonable. It would not be difficult to imagine a situation where the creditor lowballs the first sale, then return to court to obtain an order for another property of the debtor, and then proceeding to lowball on that sale too, causing them again to return to court for a third time.

 

Doesn't CAFEA hurt creditors?

 

Not in that sense that it only requires them to be reasonable. If a creditor behaves reasonably but, still somehow, is not able to generate proceeds to satisfy the judgment debt, they still have the option to seek what's called a "deficiency judgment." CAFEA is aimed at oppressive, predatory or intentionally unreasonable conduct.

 

 

 

This is only a proposal. It may be revised after it is presented to Council for consideration.

 

For more questions regarding this reform, feel more than free to write to [email protected] (( drop a PM. ))

 

 

 

 

 

 

(( Please keep in mind that while some of these reforms may typically be beyond the a city council's control, LFM has allowed us to propose changes to state law which we can then "transmit" to the state legislature (LFM). They will then decide, in turn, whether to adopt the proposal as we have drafted it or refuse it with some reason and to send it back. ))

 

 

 

Edited September 24, 2020 by Midsummer Night's Dream
typo: "lsdemcrats.com"