A bill passed by the Wisconsin state legislature last week alters consumer law to ease regulations for debt collectors.
The bill, which awaits the Gov. Scott Walker's signature, cuts the amount of information needed for a debt collector to file a lawsuit to only a final billing statement presumed to be an accurate reflection of the amount owed. It also makes it more difficult for a consumer to recover lawyers’ fees.
Rep. Mark Born, R-Beaver Dam, and the bill’s main sponsor, defended the changes as necessary to clarify ambiguities in the requirements that merchants must meet to file a lawsuit.
Consumer protection lawyers in Wisconsin have predicted an invasion of "junk debt" buyers, misdirected judgments and clogged courts. Vicky Selkowe of Legal Action Wisconsin said, if signed, the law would create a statewide standard tied to the business model of third-party debt buyers. While nationally there is a crackdown on debt buyers, Wisconsin is making it easier for them to operate, she added.
The bill sailed through the state's Senate and Assembly committees.
James Johannes, a banking and finance expert and professor at the University of Wisconsin School of Business, countered criticism of the bill stating that it’s good for all consumers except those who use loopholes to escape paying their debts. The bill rewards responsible borrowers by lowering their cost of credit, he said.
Johannes believes the new legislation clarifies what documents are necessary to establish a claim and therefore eliminates uncertainty.
Rep. Born said different judges across the state have offered different rulings on lawsuit requirements, and those are clarified with the change. He said fewer ambiguities also will help ensure that people who owe money are paying their debts, making credit more accessible and affordable for everyone.
But Sarah Orr, an assistant professor and director of the Consumer Law Clinic at the University of Wisconsin-Madison Law School, said rewriting the Wisconsin Consumer Act with the new law essential "evaporates remedies for consumers if they are brought into these lawsuits … and puts more of the burden on the consumer, and that has never been part of our consumer act. It will require more lawyers, actually.”
