AUSTIN, Texas – Credit unions located hundreds of miles away in a different state than Texas will still be affected by a collection law passed last year by the state legislature as long as the CU has members who reside in Texas. SB 533, which revises sections of the Texas Debt Collection Act, was effective Sept. 1, 2003. It requires any credit union that has members who reside in Texas – even if the credit union doesn’t have a branch in Texas – to collect any debt from those members and provide disclosures to the members about that fact that the CU is attempting to collect a debt. The new law stipulates that if a credit union employee communicates with a member in an effort to collect a debt, the CU employee must provide three disclosures to the member: in an initial written or oral communication, the employee must disclose that they are attempting to collect a debt; that any information obtained will be used for that purposes; and that the CU employee is a debt collector. Potential penalties for violating section 392.304 of the Finance Code include monetary fees of $100 to $500 per violation, as well as injunctive relief, actual damages, and attorney’s fees. Suzannne Yashewski, an attorney at the Texas Credit Union League advised all credit unions to “adopt new written policies and procedures for the initial oral or written contact with a borrower (for debt collection purposes) as well as policies and procedures dealing with subsequent oral and written communications with a borrower.” In addition, Yashewski recommended that both current and new CU employees should receive the updated policies and procedures, as well as training on the new required disclosures. She also said credit unions should update written communications between the CU and borrowers to include the required disclosures, and they should consider implementing a compliance or legal review of all collection letters before sending them out. Credit unions, said Yashewski, “should note the broad nature of this piece of legislation. All staff (not just those in the collection department) must be trained regarding compliance with the new law. Any staff member who engages a member in a communication that could be construed as attempting to collect a debt must provide the required disclosure.” Yashewski used the following example to illustrate her point: a member requests a withdrawal from their checking account, and the CU teller mentions that the account is overdrawn and attempts to collect the NSF check and/or fee from the member. This type of communication involves an attempt to collect a debt owed to the credit union. Under the new law, the CU teller is required to provide the required disclosure. If the credit union has provided staff with pre-printed wording, then in this type of instance, the teller can either read the disclosure to the member or hand the member the disclosure for them to read. -

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