Mr. GONZALEZ. Thank you, Mr. Chairman.

I would just like to point out that I have two fellow Texans here. I believe Mr. Robuck is from Texas, and your associate-you may wish to introduce him and tell us your role. I believe you are associated with Mr. Spafford and the association?

Mr. ROBUCK. That's correct, Mr. Gonzalez.

Mr. GONZALEZ. You don't have any formal statement to present this morning except that presented by the association?

Mr. ROBUCK. That is correct.

Mr. GONZALEZ. Would you mind introducing your associate? Mr. ROBUCK. This is James E. Sutton who is counsel for the Chilton Corp.

Mr. GONZALEZ. Well, they are good fellow Texans. They are not exactly from the 20th Congressional District, but a Texan is a Texan.

I would like to point out that the State of Texas does have what I consider to be a fairly stringent law. Maybe this is because one of my State senators is a bill collector. He has a collection agency-but sometime later I would like to analyze and make a comparative study of the proposal here in the subcommittee with that which Texas has already, and perhaps offer some suggestions.

I would like to thank Mr. Spafford. Obviously, he gave his statement considerable thought and evaluation, and I thought it was a definite. contribution to the subcommittee's ability to evaluate the need for this legislation.

Mr. SPAFFORD. Thank you, Congressman.

Mr. GONZALEZ. Thank you, sir.

Thank you, Mr. Chairman.

Mr. ANNUNZIO. Mr. Grassley.

Mr. GRASSLEY. Thank you, Mr. Chairman. I appreciate the opportunity to be able to ask some questions. Usually the people down at the tail end get cut off somewhere along the way.

I want to make reference to what you might think of the definition of meaningful contact. I think the bill is fairly specific about two contacts a week and prohibition from calling employers about a debt. Can you live with these sorts of prohibitions?

You might also speak more generally about what you would figure would be a good definition of meaningful contact.

Mr. SPAFFORD. Well, Congressman, we have a great deal of difficulty even trying to define "meaningful," as we would the word "reasonable. There are many, many examples of a telephone contact. When you speak to a child, a son, or daughter of the actual debtor, or you speak to the household and the debtor is busy; is that a meaningful contact? Mr. GRASSLEY. Well, are you suggesting that the bill itself should be more specific?

Mr. SPAFFORD. Yes. I do not think that the words "meaningful contact" has any meaning, if you will. We think it should be more specific as to the types of contact. We do not think there should be a restriction on contacts, as a matter of fact.

Mr. GRASSLEY. In other words, you are not in favor of a limitation. of two per week?

Mr. SPAFFORD. We are not in favor of that.

Mr. GRASSLEY. What about the prohibition on calling an employer? Mr. SPAFFORD. We are in favor of permitting a collector to contact an employer.

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Mr. GRASSLEY. Even though sometimes that leads to difficulties between the employer and employee?

Mr. SPAFFORD. Well, I think, probably, the best example under which we would support that type of provision is the proposed New Jersey law to which the ACB analysis and commentary refers.

Mr. CONNELLY. Mr. Grassley, in our statement we gave an example of the New Jersey proposal. It is a proposal in New Jersey in that section as to a type of meaningful contact that could be made with an employer in fairness, we believe. We don't think it should be wiped out completely.

It is explained in that section.

Mr. GRASSLEY. Let me read that section.

Communicating with the debtor's employer regarding the debtor's consumer debt: Unless there has been a default in any payment in whole or part of the debt for at least 30 days or at least 10 days prior to notice of the intention to so communicate with the employer has been given to the debtor, or when the purpose of the communication is to locate the debtor, or where the debtor or his attorney has consented to such communication.

And you are suggesting similar language for this bill?

Mr. CONNELLY. Yes, sir.

Mr. GRASSLEY. Has this served to be a fairly good balance or compromise between what we might be suggesting in this bill and if there would be no restriction at all.

Mr. SPAFFORD. We think it is a very fair compromise.

Mr. GRASSLEY. I would like to go on to another question. And I asked this to a previous witness, also.

We heard last week of some of the tactics used by collectors. Would you give us some examples of tactics used by debtors to avoid payment of just debt?

Mr. SPAFFORD. Congressman, again I would like to defer to these two gentlemen who are actually in the business.

Mr. Ogden, would you like to comment on that?

Mr. OGDEN. Well, I could comment on it, but it might take a book to do the job.

There are many tactics, such as just not having any telephone or not responding to the mail. There are all kinds of tactics that people who are purposely trying to avoid their obligations will utilize.

I think one thing we have to consider is that not all debtors, though, are purposely trying to avoid their obligations. Some of them just simply are not in a position where they can meet that obligation, and they will do the best they can under the circumstances.

But as far as tactics are concerned, they are endless. And you should talk to a collector who sits on a collection desk every day, and they could tell you some of the things that are done, the obscenities that are thrown at the collector who is merely trying to make, as we talked about here a moment ago, a meaningful contact in an effort to resolve the obligation.

So I do not know that we can give you specifics without really going into a lot of detail.

Mr. GRASSLEY. Well, I appreciate your comment regardless, and I understand the fact that it would take a lot of time to be real specific. My last question: What part of the recordkeeping requirements of this bill do you agree with, and what parts do you object to.

Mr. SPAFFORD. Well, Congressman, I think rather than dissect sections 808 and 810, we would prefer to support the triggering mechanism that Congressman Wylie and I discussed a moment ago.

As we suggested in our opening statement, this gives the debtor a chance to contest what he feels is an unfair debt, or it is not a proper debt.

Mr. GRASSLEY. Well, then, the recordkeeping requirements would be one of those provisions that you then would suggest be stricken from the bill?

Mr. SPAFFORD. Yes; as it is written, yes, sir.

There are certain records that a collection office must keep, like the nature of a contact, what happened in the contact, if there was a promise to pay so that they can follow up on that account if the promise is not kept.

Mr. GRASSLEY. Well, wouldn't you feel that if we are going to pass any legislation at all, that there would have to be some uniformity there in the requirements, as opposed to your suggestion that there are, obviously, some records that every collection agency would have to keep?

Mr. SPAFFORD. Well, as in the Fair Credit Reporting Act, I think if we took the same approach in this bill-and that is that it would require the collection office to follow reasonable procedures to protect the debtor as well as a creditor-I think that would suffice. Mr. GRASSLEY. Thank you, Mr. Chairman.

Mr. ANNUNZIO. Thank you, Mr. Grassley.
Mr. Wylie has one more question.

Mr. WYLIE. I think this should be either for Mr. Spafford or Mr. Connelly, or both.

I notice in the appendix of your statement here that you say― you refer to section 807. It says:

The goal in this section is apparently to prohibit creditors from accepting post-dated checks given in good faith by a debtor in order to eliminate unnecessary communication with the collector.

And then you make reference to the fact that that postdated check is deposited prior to the date on the check and that that, then, becomes a criminal violation for the writing of a bogus check. At least, that is what I infer from your statement. And you suggest language which would prohibit the depositing of any check prior to that date.

It has been a long time since I have taken bills and notes, but I was under the impression that that was not a valid check until the date. which appeared on there, if it is a postdated check, and I question whether it is a criminal violation.

Mr. CONNELLY. Sir, I could not debate it with you, except that the last banker I spoke with in Texas-and I must make a confession before the Congress, it was my check

Mr. WYLIE. You postdated a check?

Mr. CONNELLY. Yes, I did, and I thought I was all right. I postdated it to a hospital for a baby that had just been born, and it went through. It was 1 day off of my deposit. The bank said the date is meaningless; the date is simply for your records, for your recordkeeping, and that the key words on the check are "pay to the order of" this amount of money, signed by-you can do that on this scratch pad

right here, and it is a demand payment, if I gave you my account number. That is our understanding of it.

Therefore, we do not think it is the date that is so significant on the check, Mr. Wylie. If in order to accomplish the goal of finding the debtor in violation of passing a bogus check, the debt collector deposits the check early, then that is the part that should be the violation. Mr. WYLIE. Of course, I think a bank makes a mistake when they accept a postdated check.

Mr. CONNELLY. I think you would hear differently from the banker. Mr. WYLIE. Well, I will take a look at that, and we will do some followup legal research on it. But I am of the opinion right nowand you might do the same thing-that a postdated check cannot be a bogus check prior to the date.

Mr. CONNELLY. Well, you will recall, Mr. Wylie, that the master sergeant's problem was, he postdated his check and it was deposited too early, according to what he said.

Mr. WYLIE. But it passed the date of the post date.

What he was-he postdated several checks, and then he did not have enough money to cover all of them on the dates which appeared on all of the checks.

Mr. CONNELLY. I did not understand it that way, sir.

Mr. ANNUNZIO. Will the gentleman yield?

Mr. WYLIE. Yes.

Mr. ANNUNZIO. I hope I can clarify the record.

What the sergeant did was postdate a check in agreement with the collection agency. It was in October. But the collection agency cashed it instead of holding that check. He had promised to have the money in the bank so that the check would clear on that date. A copy of the check was shown to the hearing audience in the Banking Committee room indicating the date on the back of the check where the debt collector had sent it to the bank. The debt collector knew that by so doing that there was no money in the bank to clear the check, because the sergeant said there would be no money. So I am not an attorney, but I can understand your interpretation of a check and a date. The date has nothing to do with it. The important thing is, is to have the money in the bank so that it can clear.

Mr. CONNELLY. We think, Mr. Chairman, that the emphasis is just misplaced. It is not on the receipt of the check; it is on the deposit of the check.

We have conducted some informal research on how banks treat postdated checks. The bank officials we talked with said that the dates on checks are not recorded when the computer processes them. If there are sufficient funds in the depositor's checking account, the amount of the check is deducted from the balance. If there is not sufficient funds at the moment, the check is rejected and withdrawn from the batch. We are advised that a common procedure is then for these rejected checks to be placed on some bookkeeper's desk for review the next day. He is supposed to scan the checks before the depositors are notified their checks are being returned, and when he sees a date on the check in advance of the date it was deposited or cashed, it is returned as "postdated" rather than "insufficient funds." However, the bankers admitted that there is no standard procedure for this and the matter

of the date of the check is frequently overlooked because of the press of other duties or sheer volume of returned checks.

Mr. WYLIE. Well, we might clear that up, and I will do more legal research.

But could I just ask one more question of Mr. Ogden, since he is an operative, and you do operate your own independent collection agency?

Mr. OGDEN. Yes; I do.

Mr. WYLI.E. Now, as I understand it, Mr. Chairman, we are only talking about 1 percent of all of the debts now being collected in the United States. The independent collectors only collect about 1 percent of the debts. In the area of the definition of who is covered by this bill, can you draw a distinction between tactics-and that is what we are talking about here, I guess-used by collectors of your agency and those used, for example, in the collecting of a debt by a large department store which does not use an independent debt collection agency?

Mr. OGDEN. Well, if I can preface my response to you, Mr. Wylie, my own interpretation, as I look at the law, as it is written in section 802, I do not see how any operation primarily engaged in the debt collection activity is excluded from the law. It seems to me that all debt collection activities whose primary function is debt collection is addressed, too. However, I understand there is some question.

I might ask the chairman, if I may: Does the law include just collection agencies, or does it include all collection activities whose primary function is that of debt collection?

Mr. ANNUNZIO. Only collection agencies.

Mr. OGDEN. Then my response to you, Mr. Wylie, would be, I cannot see any difference in harassment, whether it be by a medical assistant in a doctor's office or by a collector in a collection office; and if two people are doing exactly the same function for the same end, I cannot see that one should be treated differently than the other simply because they are employed by different entities.

I think, in fairness, we have to take a look at that.

Mr. WYLIE. In other words, you think these other actions should be treated the same way in the law?

Mr. OGDEN. What I am saying is, harassment is harassment, regardless of who is conducting it.

Mr. WYLIE. Thank you very much.

Mr. ANNUNZIO. Thank you, Mr. Wylie.

On behalf of the subcommittee, Mr. Spafford, I want to extend our appreciation to you for coming from Texas. Your statement was a moderate statement, a very good statement, and a conciliatory statement, and one in which you ask to work with the committee. We look forward to that and we thank you very much for an excellent state

ment.

Mr. SPAFFORD. Thank you very much, Mr. Chairman and members of the subcommittee.

Mr. ANNUNZIO. Now, the second panel: John W. Johnson, executive vice president of the American Collectors Association; Jack Fletcher, president of the United Creditors of Nashville, Tenn.; and Linda Russell, representing the Credit Bureau of Carbon County, Wyo.