2024 -- S 2712

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LC005631

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2024

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A N   A C T

RELATING TO FINANCIAL INSTITUTIONS -- RHODE ISLAND FAIR DEBT

COLLECTION PRACTICES ACT

     Introduced By: Senators McKenney, and Pearson

     Date Introduced: March 05, 2024

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 19-14.9-3 of the General Laws in Chapter 19-14.9 entitled "Rhode

Island Fair Debt Collection Practices Act" is hereby amended to read as follows:

     19-14.9-3. Definitions.

     For the purposes of this chapter, the following terms shall have the following meaning

unless the context otherwise requires:

     (1) “Consumer” means any person obligated or allegedly obligated to pay any debt, as

defined by 15 U.S.C. § 1692a.

     (2) “Consumer reporting agency” means any person which, for monetary fees, dues, or on

a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or

evaluating consumer credit information or other information on consumers for the purpose of

furnishing consumer reports to third parties.

     (3) “Creditor” means any person who offers or extends credit creating a debt or to whom a

debt is owed, but the term shall not include a person to the extent that he/she receives an assignment

or transfer of a debt in default solely for the purpose of facilitating collection of the debt.

     (4) “Debt” means any obligation or alleged obligation of a consumer to pay money arising

out of a transaction in which the money, property, insurance, or services that are the subject of the

transaction are primarily for personal, family, or household purposes, whether or not the obligation

has been reduced to judgment.

     (5) “Debt collector” means any person who uses an instrumentality of interstate commerce

or the mails in any business the principal purpose of which is the collection of any debts, or who

regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be

owed or due another. Notwithstanding the exclusion provided by clause (f) below, debt collector

shall include a creditor who, in the process of collecting his/her own debt, uses any name other than

his/her own which would indicate that a third person is collecting or attempting to collect the debt.

Debt collector shall also include a person who uses an instrumentality of interstate commerce or

the mails in a business the principal purpose of which is the enforcement of security interests. Debt

collector shall not include:

     (a) An officer or employee of a creditor while, in the name of the creditor, collecting debts

for the creditor;

     (b) A person while acting as a debt collector for another person, both of whom are related

by common ownership or affiliated by corporate control, if the person acting as a debt collector

does so only for a person to whom it is so related or affiliated and if the principal business of the

person is not the collection of a debt;

     (c) An officer or employee of the United States or a state of the United States to the extent

that collecting or attempting to collect a debt is in the performance of his/her official duty;

     (d) A person while serving or attempting to serve legal process on another person in

connection with the judicial enforcement of a debt;

     (e) A nonprofit organization that, at the request of a consumer, performs bona fide

consumer credit counseling and assists the consumer in the liquidation of debts by receiving

payments from the consumer and distributing the amounts to creditors;

     (f) A person collecting or attempting to collect a debt owed or due or asserted to be owed

or due another to the extent the activity:

     (i) Is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement;

     (ii) Concerns a debt that was originated by the person;

     (iii) Concerns a debt that was not in default at the time it was obtained by the person or in

connection with a debt secured by a mortgage, when first serviced by the person; or

     (iv) Concerns a debt obtained by the person as a secured party in a commercial credit

transaction involving the creditor;

     (g) Attorneys-at-law collecting a debt on behalf of a client;

     (h) An agent or independent contractor employed for the purpose of collecting a charge or

bill owed by a tenant to a landlord or owed by a customer to a corporation subject to the supervision

of the department of business regulation insofar as the person collects charges or bills only for the

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landlord or supervised corporations.

     (6) “Department” means the department of business regulation.

     (7) “Director” means the director of the department of business regulation, or the director’s

designee.

     (8) "Eligible individual" means a Rhode Island resident that has medical debt equal to five

percent (5%) or more of their annual income; or has a household income up to four hundred percent

(400%) of the federal poverty line.

     (9) "Medical debt" means a debt arising from the receipt of medical services, products, or

devices.

     (10) "Qualified nonprofit" means a nonprofit entity with experience in and, in the regular

course of its operations, purchases medical debt and discharges it at a substantially reduced cost.

     (8)(11) “Registrant” means an entity registered under this chapter.

     SECTION 2. Section 19-14.9-14 of the General Laws in Chapter 19-14.9 entitled "Rhode

Island Fair Debt Collection Practices Act" is hereby repealed.

     19-14.9-14. Severability.

     If any provision of this chapter or its application to any person or circumstance is held

invalid by a court of competent jurisdiction, the invalidity does not affect other provisions or

applications of the chapter that can be given effect without the invalid provision or application, and

to this end the provisions of the chapter are severable.

     SECTION 3. Chapter 19-14.9 of the General Laws entitled "Rhode Island Fair Debt

Collection Practices Act" is hereby amended by adding thereto the following sections:

     19-14.9-15. Retirement of certain medical debt for qualifying households.

     (a) The general assembly is authorized to appropriate such funds (the "funds") as it deems

necessary from the unappropriated balance of funds remaining from the American Rescue Plan Act

of 2021 (ARPA), Pub. L. 117-2, as amended, for the purposes of discharging certain medical debt,

as further set forth in this section.

     (b) The general treasurer is hereby authorized to enter into an agreement with a qualified

nonprofit for the purpose of purchasing the medical debt of Rhode Island residents that have gone

into collections and are being sold by the original or any subsequent creditor. Such agreement with

the qualified nonprofit entity shall be made upon terms and conditions consistent with the American

Rescue Plan Act.

     (c) The qualified nonprofit entity shall be selected based upon the entity's ability to

implement the provisions of this section in order to reduce medical debt for the people of the state

by engaging in the following actions:

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     (1) Contact local hospitals. hospital systems, and collection agencies that deal in and hold

medical debt;

     (2) Purchase entire portfolios of medical debt owed by eligible individuals: and

     (3) Notify eligible individuals of the discharge of their debt, and the possible federal

income tax implications that arise from discharge of indebtedness.

     (d) Funds appropriated by this section shall be maintained in a separate account for the

discharge of medical debt. The general treasurer is authorized to draw from the fund for payment

to the qualified nonprofit agency upon presentation of a copy of a valid form 1099-C for debt

discharges equaling or in excess of six hundred dollars ($600), demonstrating the eligible

individual's discharge of debt from the qualified nonprofit entity. For medical debt discharged that

equals less than six hundred dollars ($600) the qualified nonprofit agency shall remit a form to the

office of the general treasurer and the eligible individual, to be established by the office of the

general treasurer. that will include the flowing information;

     (1) The eligible individual's name;

     (2) The eligible individual's address;

     (3) The eligible individual's date of birth;

     (4) The eligible individual's phone number if any;

     (5) The eligible individual's social security number;

     (6) The total amount of medical debt that has been forgiven;

     (7) The purchase price of the medical debt;

     (8) A copy of the receipt for the purchase of the medical debt;

     (9) The date the medical debt was purchased; and

     (10) The date the medical debt was forgiven.

     (e) Provided, these funds shall be paid to the qualified nonprofit and not to the hospital,

hospital system, or debt collection agency. Payments to the hospital, hospital system, or debt

collection agency shall be made from the qualified nonprofit.

     (f) Medical debt discharged through the qualified nonprofit shall not be counted as taxable

income to the eligible individual for purposes of any state income tax.

     (g) In order for an individual to qualify to have medical debt discharged pursuant to this

section, they must be an eligible individual.

     19-14.9-16. Severability.

     If any provision of this chapter or its application to any person or circumstance is held

invalid by a court of competent jurisdiction, the invalidity does not affect other provisions or

applications of the chapter that can be given effect without the invalid provision or application, and

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to this end the provisions of the chapter are severable.

     SECTION 4. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO FINANCIAL INSTITUTIONS -- RHODE ISLAND FAIR DEBT

COLLECTION PRACTICES ACT

***

     This act would authorize an appropriation from the American Rescue Plan Act of 2021

(ARPA) to allow the governor to contract with a nonprofit entity for purposes of purchasing and

retiring large portfolios of medical debt, for the benefit of the people of the state who meet certain

debt or income amounts.

     This act would take effect upon passage.

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