Now that the initial onslaught of COVID-19 is stabilizing, businesses in Texas may resume debt collection activities, with some caveats. On May 14, 2020, the Texas Supreme Court lifted a judicially imposed moratorium on certain debt collection activities that had been previously enacted because of the virus. The stay on collections was imposed early during the public health emergency as the state grappled to manage the unprecedented pandemic.
The Texas Supreme Court’s order says that the issuance and service of writs of garnishment and turnover orders can once again go into effect “in any action to collect consumer debt as defined by Texas Finance Code Section 392.001(2).” However, federal CARES stimulus funds are exempt from collections.
It’s important to note that a debtor is entitled, upon request, to an in-person or remote hearing within two (2) business days of the court’s receipt of the request “to determine what funds are attributable to a stimulus payment received pursuant to Section 2201 of the CARES Act.”
This may sound a bit complicated … because it is. If you are wanting to resume business-to-business collections or if your business has been served with a collection notice, a skilled Houston business attorney can help you sort through your rights and obligations. Attorney Andrew Weisblatt has years of successful experience advising and representing companies through every stage of the business lifecycle. He would be glad to answer your questions and explain the current requirements for B2B collections during COVID-19. Contact the Weisblatt Law Firm at 713-666-1981.
Has small business debt collection during COVID evolved?
Yes, the rules around small business debt collection during COVID have changed, and then changed again. In an effort to manage the effects and financial fallout of the pandemic, courts and lawmakers have issued orders and grappled with legislation.
Under the Texas Supreme Court’s order in May, Texas courts and some turnover receivers “must release or refund any [CARES] stimulus payments affected by garnishment or turnover.”
In addition, the court required that judgment creditors send the following notice to debtors when serving a garnishment writ:
“IF YOU RECEIVED A STIMULUS PAYMENT FROM THE IRS UNDER THE CARES ACT, THE AMOUNT YOU RECEIVED MAY BE SUBJECT TO A COURT STAY PROTECTING THOSE FUNDS DURING THE CURRENT EMERGENCY. YOU HAVE A RIGHT TO REQUEST A HEARING WITH THE COURT, AND THE COURT WILL CONSIDER YOUR REQUEST ON AN EXPEDITED BASIS.”
We all know that business to business collections can be complicated in the best of times. They are even more complicated in the midst of a pandemic. The best thing to do is get legal guidance before sending out a collection notice, especially if you are uncertain about the current details of local and state court orders on the matter.
For a full list of Emergency Orders issued by Texas courts related to the pandemic, click here. For further explanation of Texas and federal laws, including what rights and protections they give people who owe money, click here.
How to collect business debt during COVID
Most businesses know how to collect business debt. The Texas Attorney General’s office provides a list of what debt collectors cannot do in an effort to recoup an outstanding debt.
What Debt Collectors Can’t Do
Debt collectors are regulated by the Texas Debt Collection Act. Among other things, the Act prohibits debt collectors from:
Using abusive collection tactics, including:
- making collect telephone calls without disclosing the true name of the caller before the charges are accepted
- falsely accusing the consumer of fraud or other crimes
- threatening violence or other criminal acts
- using profane or obscene language
- using the telephone to harass debtors by calling anonymously or making repeated or continuous calls
- threatening arrest of the consumer, or repossession or other seizure of property without proper court proceedings.
Using fraudulent collection tactics, including:
- failing to identify who holds the debt
- using a false name or identification
- falsely representing that the collector has information or something of value in order to discover information about the consumer
- misrepresenting the amount of the debt or its judicial status
- misrepresenting the nature of the services rendered by the collection agency or the collector
- trying to collect more than the amount originally agreed upon (but remember: your debt can grow by the addition of fees — e.g., collection fees, attorney fees, etc.)
- sending documents to a debtor that falsely appear to be from a court or other official agency.
Violators of the Texas Debt Collection Act are subject to criminal and civil penalties. If you think you have been harassed or deceived, you can even seek injunctions and damages against debt collectors.
Contact a skilled Houston business attorney today
If you have questions or concerns about Texas debt collection rules during COVID, the best thing to do is to contact a skilled and experienced business attorney before taking any action against a debtor. Because there is still so much uncertainty surrounding the pandemic and what it will bring in the future, court orders and legislation in Texas are still evolving. What was true yesterday may not be true today. That’s why it’s so important to get a legal opinion on the matter.
Attorney Andrew Weisblatt has been guiding and advising businesses about their legal rights and obligations for decades, and he stays up to date on all new and impending court orders arising from COVID. He also provides a wealth of other legal services to business owners and individuals. To find out more about how Mr. Weisblatt can help you now and in the future, call him at 713-666-1981. Whether you have a one-time legal need or want to establish an ongoing relationship with outside counsel, Mr. Weisblatt welcomes the opportunity to discuss your legal needs.