AUSTIN, Texas – Credit unions located hundreds of miles away ina different state than Texas will still be affected by a collectionlaw passed last year by the state legislature as long as the CU hasmembers who reside in Texas. SB 533, which revises sections of theTexas Debt Collection Act, was effective Sept. 1, 2003. It requiresany credit union that has members who reside in Texas – even if thecredit union doesn't have a branch in Texas – to collect any debtfrom those members and provide disclosures to the members aboutthat fact that the CU is attempting to collect a debt. The new lawstipulates that if a credit union employee communicates with amember in an effort to collect a debt, the CU employee must providethree disclosures to the member: in an initial written or oralcommunication, the employee must disclose that they are attemptingto collect a debt; that any information obtained will be used forthat purposes; and that the CU employee is a debt collector.Potential penalties for violating section 392.304 of the FinanceCode include monetary fees of $100 to $500 per violation, as wellas injunctive relief, actual damages, and attorney's fees. SuzannneYashewski, an attorney at the Texas Credit Union League advised allcredit unions to “adopt new written policies and procedures for theinitial oral or written contact with a borrower (for debtcollection purposes) as well as policies and procedures dealingwith subsequent oral and written communications with a borrower.”In addition, Yashewski recommended that both current and new CUemployees should receive the updated policies and procedures, aswell as training on the new required disclosures. She also saidcredit unions should update written communications between the CUand borrowers to include the required disclosures, and they shouldconsider implementing a compliance or legal review of allcollection letters before sending them out. Credit unions, saidYashewski, “should note the broad nature of this piece oflegislation. All staff (not just those in the collectiondepartment) must be trained regarding compliance with the new law.Any staff member who engages a member in a communication that couldbe construed as attempting to collect a debt must provide therequired disclosure.” Yashewski used the following example toillustrate her point: a member requests a withdrawal from theirchecking account, and the CU teller mentions that the account isoverdrawn and attempts to collect the NSF check and/or fee from themember. This type of communication involves an attempt to collect adebt owed to the credit union. Under the new law, the CU teller isrequired to provide the required disclosure. If the credit unionhas provided staff with pre-printed wording, then in this type ofinstance, the teller can either read the disclosure to the memberor hand the member the disclosure for them to read. -

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