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Collection Lawyers Could Go to Jail
for Hiring Investigators

Washington Report: by

A Correction was made in the article "Collection Lawyers Could Go to Jail for Hiring Investigators," 99 LWUSA 164, attorney Mitchell Dinkin of Palm Beach Gardens, Fla., was misidentified as a debtors' attorney.  He is actually a collection lawyer who represents creditors. The article was as follows: Collection attorneys could be sued or go to jail for hiring an investigator to find out information about a debtor's bank accounts, under a bill that has been introduced in the House.

Currently, a variety of laws make it difficult to get information about debtors from banks by prohibiting lawyers and their employees from

  • (1) telling the bank that the debtor owes a debt or

  • (2) obtaining the information under false pretenses. As a result, some lawyers hire outside investigators to track down a debtor's assets, and then make sure the investigators don't reveal to the lawyer how they found the information, says Mitchell Dinkin of Palm Beach Gardens, Fla., who primarily represents debtors.

It's a "don't ask, don't tell" policy, he says. Under the bill, an attorney could be liable if an agent, such as an investigator, used some pretext to track down financial information about a debtor. The bill prohibits asking anyone to obtain information from a financial institution "knowing or consciously avoiding knowing that the person will obtain...the information" under false pretenses. Proponents of the bill argue that it won't hurt collections because the same information can be obtained by sending information subpoenas to banks or contacting debtors themselves. But collection lawyers say that can be very difficult to do.

To get the information from a bank, "you need to know the exact name of the bank, which is usually hard to find," says Todd Houslanger, a collection attorney in Huntington, N.Y. "And debtors often don't respond and don't tell the truth." "There would be a tremendous delay in most cases if this bill passed," says H. Lee Wind, CEO of Instasearch, a New York organization that represents investigators and collection attorneys.

Last year, a similar bill was attached to a larger financial services measure that died in the Senate. Civil and Criminal PenaltiesUnder the bill, a lawyer could be liable for:

  • (1) actual damages sustained by the bank or the debtor as a result of the lawyer's actions or

  • (2) any compensation the lawyer received as a result of the violation, whichever is greater, plus reasonable attorney fees. A lawyer could also face criminal fines and/or up to five years in jail. These penalties could be doubled if the attorney was also engaged in other illegal conduct involving more than $100,000.

States would be permitted to sue for statutory damages of up to $1,000 per violation and attorney fees.

Here is the Bill

The bill is H.R. 30, the "Financial Information Privacy Act of 1999," sponsored by Rep. James Leach, R-Iowa. Financial Information Privacy Act of 1999HR 30 IH106th CONGRESS1st Session H. R. 30 To protect consumers and financial institutions by preventing personalfinancial information from being obtained from financial institutions underfalse pretenses.

IN THE HOUSE OF REPRESENTATIVES January 6, 1999 Mr. LEACH (for himself, Mrs. ROUKEMA, Mr. LAZIO, Mr. CASTLE, Mr. LAFALCE,Mr. HINCHEY, and Mr. VENTO) introduced the following bill; which was referred to the Committee on Banking and Financial Services A BILL To protect consumers and financial institutions by preventing personal financial information from being obtained from financial institutions underfalse pretenses.

Be it enacted by the Senate and House of Representatives of the UnitedStates of America in Congress assembled,

SECTION 1. SHORT TITLE.This Act may be cited as the `Financial Information Privacy Act of1999'.

SEC. 2. FINANCIAL INFORMATION PRIVACY.The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amendedby adding at the end the following:`TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION`

SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.`(a) SHORT TITLE- This title may be cited as the `FinancialInformation Privacy Act of 1999'.`(b) TABLE OF CONTENTS- The table of contents for this title is asfollows:`TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION`

  • Sec. 1001. Short title; table of contents.`

  • Sec. 1002. Definitions.`

  • Sec. 1003. Privacy protection for customer information offinancial institutions.`Sec. 1004. Administrative enforcement.`

  • Sec. 1005. Civil liability.`

  • Sec. 1006. Criminal penalty.`

  • Sec. 1007. Relation to State laws.`

  • Sec. 1008. Agency guidance.`

SEC. 1002. DEFINITIONS.`For purposes of this title, the following definitions shall apply:`

  • (1) CUSTOMER- The term `customer' means, with respect to afinancial institution, any person (or authorized representativeof a person) to whom the financial institution provides a productor service, including that of acting as a fiduciary.`

  • (2) CUSTOMER INFORMATION OF A FINANCIAL INSTITUTION- The term`customer information of a financial institution' means anyinformation maintained by a financial institution which isderived from the relationship between the financial institutionand a customer of the financial institution and is identifiedwith the customer.`

  • (3) DOCUMENT- The term `document' means any information in anyform.`

  • (4) FINANCIAL INSTITUTION-`(A) IN GENERAL- The term `financial institution' means anyinstitution engaged in the business of providing financialservices tocustomers who maintain a credit, deposit, trust, or other financial accountor relationship with the institution.`

(B) CERTAIN FINANCIAL INSTITUTIONS SPECIFICALLY INCLUDED-The term `financial institution' includes any depositoryinstitution (as defined in section 19(b)(1)(A) of theFederal Reserve Act), any loan or finance company, anycredit card issuer or operator of a credit card system, andany consumer reporting agency that compiles and maintainsfiles on consumers on a nationwide basis (as defined insection 603(p)).`

(C) FURTHER DEFINITION BY REGULATION- The Board ofGovernors of the Federal Reserve System may prescriberegulations further defining the term `financialinstitution', in accordance with subparagraph (A), forpurposes of this title.`


(a) PROHIBITION ON OBTAINING CUSTOMER INFORMATION BY FALSE PRETENSES-It shall be a violation of this title for any person to obtain orattempt to obtain, or cause to be disclosed or attempt to cause to bedisclosed to any person, customer information of a financialinstitution relating to another person--`

  • (1) by knowingly making a false, fictitious, or fraudulentstatement or representation to an officer, employee, or agent ofa financial institution with the intent to deceive the officer,employee, or agent into relying on that statement orrepresentation for purposes of releasing the customerinformation;`

  • (2) by knowingly making a false, fictitious, or fraudulentstatement or representation to a customer of a financialinstitution with the intent to deceive the customer into relyingon that statement or representation for purposes of releasing thecustomer information or authorizing the release of suchinformation; or`

  • (3) by knowingly providing any document to an officer, employee,or agent of a financial institution, knowing that the document isforged, counterfeit, lost, or stolen, was fraudulently obtained,or contains a false, fictitious, or fraudulent statement orrepresentation, if the document is provided with the intent todeceive the officer, employee, or agent into relying on thatdocument for purposes of releasing the customer information.`

(b) PROHIBITION ON SOLICITATION OF A PERSON TO OBTAIN CUSTOMERINFORMATION FROM A FINANCIAL INSTITUTION UNDER FALSE PRETENSES- Itshall be a violation of this title to request a person to obtaincustomer information of a financial institution, knowing orconsciously avoiding knowing that the person will obtain, or attemptto obtain, the information from the institution in any mannerdescribed in subsection (a).`

(c) NONAPPLICABILITY TO LAW ENFORCEMENT AGENCIES- No provision ofthis section shall be construed so as to prevent any action by a lawenforcement agency, or any officer, employee, or agent of such agency,to obtain customer information of a financial institution in connectionwith the performance of the official duties of the agency.`

(d) NONAPPLICABILITY TO FINANCIAL INSTITUTIONS IN CERTAIN CASES- Noprovision of this section shall be construed to prevent any financialinstitution, or any officer, employee, or agent of a financialinstitution, from obtaining customer information of such financialinstitution in the course of--`

  • (1) testing the security procedures or systems of suchinstitution for maintaining the confidentiality of customerinformation;`

  • (2) investigating allegations of misconduct or negligence on thepart of any officer, employee, or agent of the financialinstitution; or`

  • (3) recovering customer information of the financial institutionwhich was obtained or received by another person in any mannerdescribed in subsection (a) or (b).`

(e) NONAPPLICABILITY TO CERTAIN TYPES OF CUSTOMER INFORMATION OFFINANCIAL INSTITUTIONS- No provision of this section shall beconstrued to prevent any person from obtaining customer information ofa financial institution that otherwise is available as a public recordfiled pursuant to the securities laws (as defined in section 3(a)(47)of the Securities Exchange Act of 1934).`

SEC. 1004. ADMINISTRATIVE ENFORCEMENT.`(a) ENFORCEMENT BY FEDERAL TRADE COMMISSION- Except as provided insubsection (b), compliance with this title shall be enforced by theFederal Trade Commission in the same manner and with the same powerand authority as the Commission has under the Fair Debt CollectionPractices Act to enforce compliance with that title.`

(b) ENFORCEMENT BY OTHER AGENCIES IN CERTAIN CASES-`(1) IN GENERAL- Compliance with this title shall be enforcedunder--`(A) section 8 of the Federal Deposit Insurance Act, in thecase of--`(i) national banks, and Federal branches and Federalagencies of foreign banks, by the Office of theComptroller of the Currency;`(ii) member banks of the Federal Reserve System (otherthan national banks), branches and agencies of foreignbanks (other than Federal branches, Federal agencies,and insured State branches of foreign banks),commercial lending companies owned or controlled byforeign banks, and organizations operating undersection 25 or 25A of the Federal Reserve Act, by theBoard;`(iii) banks insured by the Federal Deposit InsuranceCorporation (other than members of the Federal ReserveSystem and national nonmember banks) and insured Statebranches of foreign banks, by the Board of Directors ofthe Federal Deposit Insurance Corporation; and`(iv) savings associations the deposits of which areinsured by the Federal Deposit Insurance Corporation,by the Director of the Office of Thrift Supervision;and`(B) the Federal Credit Union Act, by the Administrator ofthe National Credit Union Administration with respect to anyFederal credit union.`(2) VIOLATIONS OF THIS TITLE TREATED AS VIOLATIONS OF OTHERLAWS- For the purpose of the exercise by any agency referred toin paragraph (1) of its powers under any Act referred to in thatparagraph, a violation of this title shall be deemed to be aviolation of a requirement imposed under that Act. In addition toits powers under any provision of law specifically referred to inparagraph (1), each of the agencies referred to in that paragraphmay exercise, for the purpose of enforcing compliance with thistitle, any other authority conferred on such agency by law.`

(c) STATE ACTION FOR VIOLATIONS-`(1) AUTHORITY OF STATES- In addition to such other remedies asare provided under State law, if the chief law enforcementofficer of a State, or an official or agency designated by aState, has reason to believe that any person has violated or isviolating this title, the State--`

  • (A) may bring an action to enjoin such violation in anyappropriate United States district court or in any othercourt of competent jurisdiction;`

  • (B) may bring an action on behalf of the residents of theState to recover damages of not more than $1,000 for eachviolation; and`

  • (C) in the case of any successful action under subparagraph(A) or (B), shall be awarded the costs of the action andreasonable attorney fees as determined by the court.`

(2) RIGHTS OF FEDERAL REGULATORS-`(A) PRIOR NOTICE- The State shall serve prior writtennotice of any action under paragraph (1) upon the FederalTrade Commission and, in the case of an action whichinvolves a financial institution described in section1004(b)(1), the agency referred to in such section withrespect to such institution and provide the Federal TradeCommission and any such agency with a copy of its complaint,except in any case in which such prior notice is notfeasible, in which case the State shall serve such noticeimmediately upon instituting such action.`

(B) RIGHT TO INTERVENE- The Federal Trade Commission or anagency described in subsection (b) shall have the right--`(i) to intervene in an action under paragraph (1);`(ii) upon so intervening, to be heard on all mattersarising therein;`(iii) to remove the action to the appropriate UnitedStates district court; and`(iv) to file petitions for appeal.`

(3) INVESTIGATORY POWERS- For purposes of bringing any actionunder this subsection, no provision of this subsection shall beconstrued as preventing the chief law enforcement officer, or anofficial or agency designated by a State, from exercising thepowers conferred on the chief law enforcement officer or suchofficial by the laws of such State to conduct investigations orto administer oaths or affirmations or to compel the attendanceof witnesses or the production of documentary and other evidence.`

(4) LIMITATION ON STATE ACTION WHILE FEDERAL ACTION PENDING- Ifthe Federal Trade Commission or any agency described insubsection (b) has instituted a civil action for a violation ofthis title, no State may, during the pendency of such action,bring an action under this section against any defendant named inthe complaint of the Federal Trade Commission or such agency forany violation of this title that is alleged in that complaint.`

SEC. 1005. CIVIL LIABILITY.`Any person, other than a financial institution, who fails to complywith any provision of this title with respect to any financialinstitution or any customer information of a financial institutionshall be liable to such financial institution or the customer to whomsuch information relates in an amount equal to the sum of the amountsdetermined under each of the following paragraphs:`

(1) ACTUAL DAMAGES- The greater of--`

  • (A) the amount of any actual damage sustained by thefinancial institution or customer as a result of suchfailure; or`

  • (B) any amount received by the person who failed to complywith this title, including an amount equal to the value ofany nonmonetary consideration, as a result of the actionwhich constitutes such failure.`

(2) ADDITIONAL DAMAGES- Such additional amount as the court mayallow.`

(3) ATTORNEYS' FEES- In the case of any successful action toenforce any liability under paragraph (1) or (2), the costs ofthe action, together with reasonable attorneys' fees.`


  • (a) IN GENERAL- Whoever violates, or attempts to violate, section1003 shall be fined in accordance with title 18, United States Code,or imprisoned for not more than 5 years, or both.`

  • (b) ENHANCED PENALTY FOR AGGRAVATED CASES- Whoever violates, orattempts to violate, section 1003 while violating another law of theUnited States or as part of a pattern of any illegal activityinvolving more than $100,000 in a 12-month period shall be fined twicethe amount provided in subsection (b)(3) or

  • (c)(3) (as the case maybe) of section 3571 of title 18, United States Code, imprisoned fornot more than 10 years, or both.`


(a) IN GENERAL- This title shall not be construed as superseding,altering, or affecting the statutes, regulations, orders, orinterpretations in effect in any State, except to the extent that suchstatutes, regulations, orders, or interpretations are inconsistentwith the provisions of this title, and then only to the extent of theinconsistency.`

(b) GREATER PROTECTION UNDER STATE LAW- For purposes of this section,a State statute, regulation, order, or interpretation is notinconsistent with the provisions of this title if the protection suchstatute, regulation, order, or interpretation affords any person isgreater than the protection provided under this title.`

SEC. 1008. AGENCY GUIDANCE.`In furtherance of the objectives of this title, each Federal bankingagency (as defined in section 3(z) of the Federal Deposit InsuranceAct) shall issue advisories to depository institutions under thejurisdiction of the agency, in order to assist such depositoryinstitutions in deterring and detecting activities proscribed undersection 1003.'.

SEC. 3. REPORT TO CONGRESS ON FINANCIAL PRIVACY.Not later than 18 months after the date of enactment of this Act, theComptroller General of the United States, in consultation with theFederal Trade Commission, the Federal banking agencies, and otherappropriate Federal law enforcement agencies, shall submit to theCongress a report on--(1) the efficacy and adequacy of the remedies provided in theamendments made by section 501 in addressing attempts to obtainfinancial information by fraudulent means or by false pretenses;and(2) any recommendations for additional legislative or regulatoryaction to address threats to the privacy of financial informationcreated by attempts to obtain informmation by fraudulent means or false pretenses.

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