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Consumer Debt
The Model Family Financial Protection Act (Rev. Nov. 2023) has two titles—the first deals with consumer contract and collection protections and the second with property exempt from creditors. Among other provisions, the first title limits terms that can be found in consumer form contracts, establishes verification and disclosure requirements for debt collectors, limits collector recording of calls with consumers, and restricts imprisonment for debt. The title establishes a three-year statute of limitations for collection of consumer debt, and collection lawsuits must include certain information in a notice to the consumer and in the legal complaint. Abusive requests to the consumer for admissions are limited and the creditor must provide certain information before obtaining n a default judgment. Pre- and post-judgment interest is limited.
The second title establishes a detailed set of consumer exemptions from creditor post-judgment seizure of consumer personal property, wage garnishment, and foreclosure on the consumer’s home. Dollar amounts are adjusted for inflation, waivers are limited, procedures are established for seizure of property, and requirements are set out for traceable proceeds of exempt property.
Model Consumer Amendments to Uniform Wage Garnishment Act (2017). The Uniform Law Commission has adopted a Uniform Wage Garnishment Act setting out state law protections from wage garnishment. This NCLC model law provides consumer amendments to that law. Wage garnishment is generally prohibited except for specified types of debts, and then the model amendments protect 60 times the hourly minimum wage and also any funds necessary for the support of the judgment debtor or the judgment debtor’s family. Funds transferred to an employee’s payroll card are exempt from garnishment. A self-executing amount of 240 times the hourly minimum wage is protected from the debtor’s bank account.
Model Statute of Limitations Reform Act (2015) establishes a three-year limitations period for collection of consumer debt, irrespective of the applicable cause of action. A debt is extinguished after that period, and a payment or affirmation of the debt does not extend the limitations period, and a contractual choice of law cannot extend the period. A five-year limitations period Is set for actions upon a judgment against the consumer.
Model Medical Debt Protection Act (2024) replaces the 2019 model law. The 2024 version requires for-profit hospitals, ambulatory surgical centers outpatient clinics, and health care professionals working in those settings to adopt financial assistance policies and establish certain screening procedures. So would large health care practice groups. Patients below 300% of the federal poverty level (FPL) receive free care, those at 300% to 400% of the poverty level pay 25% of the Medicare rate up to a maximum of $2300, and limits are placed on obligations of those 400% to 600% of the poverty rate. Payment plans are required. No interest can be charged to those under 600% of the FPL and interest rates are limited for other patients. Credit reporting of medical debt is prohibited. Family members are shielded from obligation for the patient’s debt and other requirements are established for collection of medical debt. Patients have a private right of action for violations under the state UDAP statute. Provisions of this model law have been enacted in a number of states, including at least California, Colorado, Connecticut, Delaware, Maryland, New Mexico, New York, Oregon, Vermont, and Washington.
Arbitration Requirements
The Model State Consumer & Employment Justice Enforcement Act (2017) includes 10 titles setting out state law provisions that are not preempted by the Federal Arbitration Act and that limit selected abuses related to mandatory arbitration requirements:
- Title I provides for whistleblowers to bring public enforcement actions to enforce worker and consumer protections on behalf of the state.
- Title II prohibits state contractors from enforcing forced arbitration agreements against any of their consumers and employees.
- Title III requires that merchants and employers provide clear notice of all material terms in a single document.
- Title IV sets out types of contractual terms related to dispute resolution that are presumptively unconscionable.
- Title V prohibits enforcement of forced arbitration clauses in employment and consumer contracts not covered by the Federal Arbitration Act.
- Title VI requires private companies that administer arbitrations to disclose certain data.
- Title VII removes the jurisdiction of appellate courts to consider appeals from denials of motions to compel arbitration.
- Title VIII prevents arbitration administrators from allowing a respondent to stall an arbitration by refusing to pay.
- Title IX ensures that an arbitration clause is not held procedurally conscionable solely because it contains an opt-out provision.
- Title X would clarify that courts should consider whether severing only unconscionable terms from a contact would create an incentive to include such terms and whether the unconscionable terms create an in terrorem effect.
Home Mortgages and Manufactured Homes
Mediation Program for Distressed Homeowners: Non-Judicial Foreclosure States (2022) creates a state-run mediation process prior to a foreclosure. Prior to any foreclosure, the consumer and the state mediation agency must receive a detailed notice concerning a defaulted home mortgage. After the notice is sent and until a mediator’s report, no fees can be assessed, or a foreclosure initiated. The state agency initiates the mediation process requiring the parties to come to mediation with specified information. The model law sets out standards for reaching an agreement as to steps to be taken concerning the mortgage. If no agreement is reached the mediator issues a report, and the homeowner can opt for a judicial foreclosure proceeding. The model also discusses responsibilities concerning the mediation fees and non-disclosure of information.
Mediation Program for Distressed Homeowners: Judicial Foreclosure States (2022) creates a mediation process as an initial step in a judicial foreclosure. Detailed information is specified for the complaint in a judicial foreclosure. The court clerk on receiving the complaint initiates the mediation process requiring the parties to come to mediation with specified information. No fees can be assessed, the complaint need not be answered, and the judicial proceeding is frozen until the mediator issues a report. The model law sets out standards for reaching an agreement as to steps to be taken concerning the mortgage. If no agreement is reached the mediator issues a report, and the judicial foreclosure proceeds. The model also discusses responsibilities concerning the mediation fees and non-disclosure of information.
Mortgage Servicer Duty of Good Faith (2023) establishes a duty of good faith for mortgage servicers. Violation of that duty can stay a foreclosure or declare a completed foreclosure sale void. Other private remedies are set out and limits on the consumer’s waiver of rights or remedies are restricted.
Model State Foreclosure Rescue Fraud Prevention Act (2008) sets out standards for when a purported absolute conveyance of title is in fact security for the performance of an obligation and deemed to be an equitable mortgage. All foreclosure rescue transactions (as defined) are equitable mortgages and disclosure must be made on any deed concerning the application of the Foreclosure Rescue Fraud Prevention Act. The model limits the enforceability of such a deed and provides rights and remedies for the homeowner to recover title to the property. Seven unfair foreclosure rescue practices are identified and prohibited. A stay of an action to evict the homeowner is specified.
NCLC’s Model Manufactured Home Community Stability and Preservation Act sets forth model language to give residents of manufactured home communities an opportunity to purchase their communities. It requires the community owner to give the residents--and a state agency, the local housing authority, and the local licensing or health and safety enforcement agency--advance notice of any prospective sale of the community. The notice must include the price, terms, and conditions that the community owner has provisionally accepted or is prepared to accept. The model law then gives the residents 90 days to propose a purchase agreement. It requires the community owner to consider their proposed agreement and negotiate with them in good faith. Moreover, if the residents’ offer matches the third-party offer, the community owner is required to sell the community to the residents. Once a purchase agreement is reached, the residents have 90 more days to arrange the necessary financing, and a commercially reasonable time to close on the sale. The model law is modeled on laws in states such as New Hampshire that have been very successful in fostering stable, affordable resident-owned communities.
Motor Vehicles
Model Consumer Amendments to Uniform Commercial Code Article 9 (2016) provides model language to amend the Uniform Commercial Code Article 9 to the extent it regulates consumer repossessions. States generally recognize that the UCC Art. 9 does not sufficiently consider the unique aspects of repossessions of motor vehicles, household goods, or manufactured homes, either through stand-alone legislation or variations to Article 9. This model provides narrowly drafted amendments to 17 Article 9 provisions, including notice, seizure, disposition, and deficiencies and surpluses relating to consumer transactions.
Model Transparent and Consistent Pricing of Motor Vehicle Add-Ons Act (2018) requires dealers to establish prices in advance for add-ons or some method for determining prices. Dealers must submit prices for their add-ons to the state attorney general, and the prices are posted online. Dealers must also post the available add-ons and their non-negotiable prices on each car offered for sale.
Model Law: Safer Cars at the Point of Sale (2018) required motor vehicle dealers, before offering for sale any used vehicle, must perform an inquiry of a NMVTIS data provider on a vehicle and a copy of any applicable report must be provided to the consumer prior to a sale’s consummation. A special disclosure is required on the vehicle if the report indicates prior wreck damage.
Tax Preparers, RALs
Model Individual Tax Preparer Regulation Act (Rev. 2013) establishes a state Board of Individual Tax Preparers, sets out the board’s powers, and requirements for tax preparers concerning registration, bonding, periodic registration renewal, and enforcement powers,. The model law sets out disclosure requirements to consumers, prohibited practices for tax preparers, and private remedies for consumers.
Model Refund Anticipation Loan Act (2008) prohibits refund anticipation loan (RAL) and refund anticipation check (RAC) add-on fees charged by tax preparers (bank rate exportation does not apply to the tax preparers). Also included are registration and bonding requirements, and restriction of registration to preparers whose primary business is tax preparation. The Model Act also prohibits debt collection abuses and prevents referrals to check cashers. It provides for mandatory disclosures orally, in wall postings, and in a disclosure sheet accompanying the RAL application. Consumers have a private right of action to recover damages, costs, and attorneys fees. Provisions have been largely adopted in Arkansas, Illinois, Maine, Maryland, and New York.
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Comprehensive Consumer and Credit Laws (from 1970s)
National Consumer Act (1970) is a 156-page comprehensive model law covering many aspects of consumer protection. The NCA’s consumer credit provisions limit interest rates, late and other charges, and provide prepayment rights. It more generally establishes requirements as to disclosures and writings in consumer transactions and limits credit terms and creditor rights, such as restrictions on balloon payments, assignment of earnings, confession of judgments, holder-in-due-course status, attorney fees, and security interests. It offers protections for credit card holders, prohibits deceptive practices and limits on warranty rights, sets out protections concerning credit insurance and other forms of insurance, limits creditor remedies and provides consumer rights concerning enforcement of security interests and various consumer remedies. Various debt collection practices are prohibited. Consumer protections are provided for credit reporting. A state agency regulates credit and other consumer transactions.
Many of the provisions of the NCA have served as the basis for consumer protection legislation throughout the nation. The NCA’s substantive credit provisions served as the starting point for what was eventually adopted in March 1972 as the Wisconsin Consumer Act.
Model Consumer Credit Act (1973) (325 pages) builds on NCLCs 1970 National Consumer Act (NCA). It is also a response to the inadequacies of the Uniform Consumer Credit Code drafted by the National Commissioners on Uniform State Laws (now the Uniform Laws Commission). While covering many of the same topics as the NCA, it has more extensive treatment of assignee attempts to cut off liability, door-to-door sales, credit card errors, credit reporting, and injunctions and class actions. Both the National Consumer Act and the Model Consumer Credit Act foreshadowed much of the consumer legislation of the 1970s.