ACA International FDCPA Essentials for Collectors

FDCPA Essentials for Collectors
©2011 ACA International. All Rights Reserved. 1
Table of ContentsTable of Contents
Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Appropriate Third-Party Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
By Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
By Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
By Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Avoiding False and Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Avoiding Unfair Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Responding to Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Cease Communication Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Creditor Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
©2011 ACA International. All Rights Reserved.2
Table of Contents
Class Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Individual Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Appendix A: Fair Debt Collection Practices Act [15 U .S .C . § 1692 et seq . (§ 801 et seq .)] . . . . . . . . . . . . . . . . . . . . . 25
Appendix B: ACA Mission, Values and Collector’s Pledge . . . . . . . . . . . . . . . 39
Appendix C: Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Appendix D: ACA International Code of Ethics and Operations . . . . . . . . . . . 51
Introduction & BackgroundIntroduction and Background
§ 801 and § 802 [15 U.S.C. § 1601 and § 1692]
Collection agencies and debt collectors are extremely important to the United States and International economies as well as the credit granting community. Debt collectors help keep the cost of products and services from skyrocketing; they put the money back into the community and help keep creditors in business. Industry research suggests that the collection industry contributes almost 50 billion dollars per year to the United States’ economy. Collection efforts are linked directly to lowering the costs of goods and services and saving money for individual families because they do not have to cover the costs of consumers who do not pay their just debts. Through the efforts of the collection industry, the average family in the United States saves almost $500 per year.
The Fair Debt Collection Practices Act (“FDCPA”)1 was passed in 1977 and became law in March of 1978. It was designed to protect consumers and eliminate abusive, deceptive and unfair debt collection practices. It was also created to help ensure ethical debt collectors were not competitively disadvantaged and to promote consistent State action to protect consumers.2 The FDCPA has been interpreted by court decisions and government regulatory agencies, such as the Federal Trade Commission (“FTC”), which has enforcement authority under the FDCPA.3 However, the core concepts of promoting ethical collection practices and eliminating abusive collection tactics have not changed.
1 15 U.S.C. § 1692 et seq. (§ 801 et seq.). 2 15 U.S.C. § 1692 (§ 802). 3 15 U.S.C. § 1692l (§ 814).
Appropriate Third-Party
Appropriate Third-Party Contacts § 804 [15 U.S.C. § 1692b]
Generally, under the FDCPA, debt collectors may only talk to the “consumer” when collecting a debt. The consumer is any natural person obligated or allegedly obligated to pay any debt.4 One very specific and narrow exception to this rule involves talking to neighbors, people in the surrounding neighborhood (known as “nearbys”), family members, friends, co- workers and other people who are not the consumer.
People other than the consumer are called “third parties.” When a debt collector contacts a third party to try to locate the consumer, it is commonly referred to as “skiptracing.” In some instances, a debt collector calls a phone number thinking it is a number for the consumer. Whether a debt collector is talking to someone trying to locate the consumer, or happens to reach a number that no longer belongs to the consumer, there is certain information the debt collector must provide, can request and must not disclose.
When skiptracing, a debt collector may ask for “location information,” which the FDCPA defines as “a consumer’s place of abode and his telephone number at such place, or his place of employment.”5 Debt collectors are prohibited from requesting any other information, such as the consumer’s work schedule, salary, pay schedule, supervisor’s name, work history, work schedule, or any other information.6 Debt collectors can attempt to verify a consumer’s employment by contacting the consumer’s workplace. In that instance, a debt collector can state he or she is trying to verify the consumer’s employment with the company, but no additional information can be requested.
When talking to a neighbor, nearby or any other third party, debt collectors are prohibited from talking about the debt.7 A debt collector must provide his or her name and state that he or she is calling to confirm or correct “location information” about the consumer.8 If the third party asks who you work for, the name of your company or where you are calling from, the debt collector can identify his or her employer, even if the name of the company discloses the existence of a debt. Debt collectors cannot provide any details about the debt and cannot confirm whether or not a debt exists. If a third party asks what the call is about, the debt collector may not disclose that a debt exists. Rather, the debt collector should tell the third party that the purpose of the call is confidential. If a third party volunteers information beyond the consumer’s home address, home phone number or place of employment, the information can be documented in the collection notes, but should indicate that the information was volunteered by the third party, not requested.
Debt collectors can contact a third party once to request information. Any additional calls will violate the FDCPA’s guidelines regarding acquiring location information9 and will
4 15 U.S.C. § 1692a(3) (§ 803(3)). 5 15 U.S.C. § 1692a(7) (§ 803(7)). 6 FTC Statements of General Policy or Interpretation Staff Commentary on the FDCPA, 53 Fed. Reg. 50097, 50103 (Dec. 13, 1988); Kwait, FTC Informal Staff Letter (Jan. 24, 1989). 7 15 U.S.C. § 1692b(2) (§ 804(2)). 8 15 U.S.C. § 1692b(1) (§ 804(1)). 9 15 U.S.C. § 1692b(3) (§ 804(3)).
Appropriate Third-Party Contacts
likely be considered to be harassing and abusive by causing a phone to ring repeatedly or continuously.10 The general rule to remember when skiptracing is “One and done.” Debt collectors get one contact to try to obtain location information. There are only two situations in which a debt collector can contact a third party a second time: (1) to update or correct information supplied earlier by that third party; or (2) if requested to do so by the third party.11 There must be a valid reason for believing the third party has updated or corrected information to help contact the consumer. These reasons must be documented in the collection notes.
If a third party asks why the debt collector is calling or if the debt collector is calling from a collection agency, the response cannot reveal the existence of or details regarding the debt. The debt collector may respond by stating something like, “I am sorry, that is confidential information” or “it is a personal business matter.” As previously noted, if the third party asks the debt collector who his or her employer is, that information must be provided.12
Debt collectors sometimes speak with third parties who do not know the consumer and do not have contact information for the consumer. When skiptracing or using outdated contact information, debt collectors might contact an individual who has the same last name or the same first and last name as the consumer. Regardless of how a debt collector gets in contact with a wrong party, the debt collector’s obligations when speaking to these third parties are the same as when speaking with a neighbor, nearby, friend, family member or co-worker.
Debt collectors should provide their name and the purpose of the call, which is to confirm or correct location information.13 If the third party expressly requests it, the debt collector must identify his or her employer.14 If the third party does not know the consumer, has no contact information for the consumer or is the new owner of the consumer’s old phone number, the information must be documented in the collection notes and the incorrect contact information removed from the account. The only information that can be requested from the third party is the consumer’s home address, home phone number and place of employment.15
When talking with any third parties, debt collectors must remain professional and limit requests for information to “location information.” The “one and done” concept applies to contacting neighbors, family members, friends, nearbys, co-workers and wrong parties (who are usually contacted by chance due to outdated contact information).
10 15 U.S.C. § 1692d(5) (§ 806(5)). 11 15 U.S.C. § 1692b(3) (§ 804(3)). 12 15 U.S.C. § 1692b(1) (§ 804(1)). 13 15 U.S.C. § 1692b(1) (§ 804(1)). 14 15 U.S.C. § 1692b(1) (§ 804(1)). 15 15 U.S.C. § 1692a(7) (§ 803(7)).
Right-Party Communications Right-Party Communications
(Who Collectors Can Talk To) § 805 [15 U.S.C. § 1692c]
The people with whom a debt collector may discuss a debt are known as “right parties.” When talking to right parties, debt collectors are not limited to requesting location information (home phone number, home address and place of employment). Rather, when talking to a right party, debt collectors can talk about the debt and try to collect it. It is important to remember that regardless of the basis on which a debt collector is authorized to talk to a right party, individuals other than the consumer may not be responsible for paying the debt from their personal funds. “Right parties” fall into three general categories: by relationship, by contract or by law.
Right Parties By Relationship Some people are right parties because of their relationship with the consumer. The person who owes the debt is known as the “consumer.”16 A consumer is “any natural person obligated or allegedly obligated to pay any debt.”17 If a consumer is a minor as defined by state law, the consumer’s parents are considered Right Parties18 with whom the debt may be discussed. In most states, anyone under the age of 18 is considered a minor. However, there are some states where anyone under 19 or 21 is a minor.19 Debt collectors should know where in the collection notes to find the consumer’s date of birth, if it is available, to determine whether or not the consumer is a minor. If the date of birth information is not available, debt collectors will need to find another way to determine the consumer’s age or, to be safe, not talk to the consumer’s parents. Debt collectors can still speak with the consumer regarding the debt. The consumer’s spouse is a right party under the FDCPA. However, debt collectors need to be cautious of the state law where the consumer lives to determine whether or not a debt can be discussed with a spouse as the state law may not allow such communication. The Federal Trade Commission stated that using an interpreter to provide information to a non-English speaking consumer about the debt would not violate the FDCPA.20 When in doubt, do not disclose information about the debt to someone other than the consumer. Even though a debt collector may be allowed to talk to people other than the consumer about the debt, those other parties may not be responsible for paying the debt.
Right Parties By Contract Some third parties become right parties by contract. This covers situations in which the consumer has entered into an agreement with a third party authorizing the third party to handle the financial affairs of the consumer. The most common example of a right party by contract is
16 15 U.S.C. § 1692a(3) (§ 803(3)). 17 15 U.S.C. § 1692a(3) (§ 803(3)). 18 15 U.S.C. § 1692c(d) (§ 805(d)). 19 Alabama (19), Colorado (21), Mississippi (21), Nebraska (19), Puerto Rico (21), West Virginia (21). 20 Zbreznj, FTC Informal Staff Letter (Sept. 21, 1992).
Right-Party Communications
an attorney. An attorney is defined as a person who went to law school and is licensed to practice law in at least one state in the United States.21 This is different from a power of attorney or an attorney-in-fact (described later). If a debt collector knows or should know that a consumer is represented by an attorney, the debt collector is authorized to communicate with the attorney only. When the consumer is represented by an attorney, the consumer is no longer a right party and may not be contacted about the debt. It is vital to obtain and update the collection notes with the attorney’s contact information. Collection agencies should have policies and procedures for how to properly document and code the account so it is routed to the proper queue. Once the attorney is represented by an attorney, the only person a debt collector can communicate with is the attorney.22 Debt collectors may not contact the consumer nor may debt collectors contact a third party to attempt to obtain location information.
The second type of right party by contract is a power of attorney or an “attorney-in-fact.” Through a power of attorney document, the consumer provides another person authority to act as his or her representative for the matters detailed in the document. Debt collectors should request a copy of the document authorizing the power of attorney to make sure the designated third party has the correct permission to discuss the debt. For example, if a document gives a third party permission to make health care decisions, this is limited authority that would not allow a debt collector to discuss the debt with the third party. Make sure to receive a copy of the power of attorney document and update the collection file with the permission to talk to the power of attorney. The power of attorney document will provide permission to talk to a specific person. Debt collectors may speak with the consumer about the debt, unless the consumer sends a cease communication notice.23 It is important to remember that just because a debt collector may discuss the debt with the attorney in fact or power of attorney, this does not mean the attorney in fact is responsible for paying the debt. The FDCPA provides that to talk to any third party regarding the debt, a debt collector needs “the prior consent of the consumer given directly to the debt collector,” so while having the documentation is strongly encouraged, obtaining the consent from the consumer is required.24
The last type of right party is a right party by contract, which includes companies such as consumer credit counseling services, debt settlement companies and debt management companies. These businesses are designed to help a consumer work through their debt issues. The companies can become a right party if the consumer authorizes a debt collector to discuss the debt with the company. Whether or not a debt collector should require written authorization to discuss the debt with the company or whether verbal permission is enough will depend on the collection agency’s policies and procedures. Similar to powers of attorney, with consumer credit counseling and debt management companies, debt collectors are still allowed to contact the consumer regarding the debt, unless the debt collector receives a cease communication notice from the consumer.
Right Parties By Law The final method of becoming a right party is through operation of law. Examples include a guardian, a personal representative, an executor or an administrator. If a consumer is unable to handle his or her own affairs, a person is appointed by the court to assist the consumer in handling his or her financial and other issues. This person is a guardian or conservator. Debt
21 Edwards, FTC Informal Staff Letter (Feb. 7, 1991). 22 15 U.S.C. § 1692c(a)(2) (§ 805(a)(2)). 23 Cease communication requests are discussed beginning on page 20. 24 15 U.S.C. § 1692c(b) (§ 805(b)).
collectors should ask the guardian or conservator to send the documentation that appointed him or her to that position. Similarly, when an individual dies, someone is appointed to make sure all of the bills and other matters are handled. This person is a personal representative or an executor. This documentation should also be requested for proper account documentation. A guardian, conservator, executor, personal representative, power of attorney, consumer credit counseling service, debt settlement company or debt management company may be authorized to discuss the debt with the collection agency, but they are not responsible for paying the debt from their personal funds.
What Collectors Can Say § 807(11) [15 U.S.C. § 1692e(11)]
Once a debt collector has identified that he or she is speaking to a right party, the debt collector needs to know what to say and what not to say. In addition to any information required by the collection agency or the specific client, the debt collector must identify him or herself and tell the consumer why he or she is calling. Generally, the debt collector will identify his or her name, the name of the collection agency, the name of the creditor and the amount due on the debt. This information is generally enough to meaningfully identify the debt collector.25 Debt collectors must also provide a notice to the consumer disclosing the purpose of the call. This is commonly referred to as the “mini-Miranda” disclosure. Commonly accepted phrasing of this disclosure is, “This is an attempt by a debt collector to collect a debt. Any information obtained will be used for that purpose.”26 Another example is, “I am required to tell you this communication is from a debt collector and is an attempt to collect a debt. Any information obtained will be used for that purpose.” After the first telephone communication with the consumer, a debt collector must disclose that the communication is from a debt collector.27 However, some state specific laws require the full mini-Miranda28 be included in all communications with the consumer. Debt collectors must be aware of the additional state requirements.
When Debt Collectors Can Contact § 805(a)(1) [15 U.S.C. § 1692c(a)(1)]
Whether a debt collector contacts a right party to attempt to collect a debt or a third party to try to locate the consumer, there are specific guidelines addressing when collection and skiptracing calls can be placed. The FDCPA provides that unless a debt collector has reason to believe it is inconvenient for the consumer, debt collectors may attempt collection and skiptrace efforts between 8:00 am and 9:00 pm in the consumer’s time zone.29 Any calls outside this time frame violate the FDCPA unless the debt collector has permission from the right party or a third party to contact that party during a different time frame. Debt collectors should review their agency’s policies and procedures regarding whether or not such permission
25 15 U.S.C. § 1692d(6) (§ 806(6)). 26 15 U.S.C. § 1692e(11) (§ 807(11)). 27 15 U.S.C. § 1692e(11) (§ 807(11)). 28 This is an attempt to collect a debt. Any information obtained will be used for that purpose. 29 15 U.S.C. § 1692c(a)(1) (§ 805(a)(1)).
can be verbal or must be submitted in writing. Any permission to call outside of the FDCPA’s permitted calling times must be documented in the collection notes.
The FDCPA prohibits calls at times that are known or should be known to be inconvenient for the person being called.30 For example, a consumer who works nights is likely sleeping until late in the morning or early afternoon. Calls before noon in the consumer’s time zone are likely inconvenient for that individual. Collection calls placed on Sundays do not violate the FDCPA on its face, unless the collector knows or should know that such a contact is inconvenient. If a consumer requests that contacts on a particular day be stopped, the debt collector should honor that request.31 Debt collectors are not prohibited from contacting consumers on holidays. However, if the collector knows or has reason to know that communicating on a holiday would be inconvenient, the debt collector should not contact the consumer. This is especially so during religious or cultural holidays. Whenever a debt collector knows, should know or has reason to know of the inconvenience to the consumer, the information should be documented in the collection notes and any other place that will alert others working the account about the restrictions on contacting the consumer.
How Collectors Can Contact The impact of technology on the collection industry brings both benefits and potential liability. On one hand, technology improves access to critical information with every advancement. However, with that efficiency comes an increased risk of disclosure and challenges in the courts. Remember, a collector may not reveal the existence of a debt to any third party in connection with the collection of a debt. Collectors must use special care when determining how to communicate with a consumer. Think about the different types of technology you use on a day-to-day basis to communicate: computers/e-mail, cell phones, text messaging, caller ID, answering machines, voicemail, fax machines - the list goes on.
With fax machines and e-mail, there is a high degree of risk for third-party disclosure. Much like a postcard, faxes and e-mail are an open-faced communication, which may be seen by others. An e-mail may be a shared account or others may have access to the e-mail address. There is limited, if any, right to privacy in a work e-mail as an individual’s employer, supervisor or assistant may have full access to read e-mails. In addition, the Internet Service Provider, or ISP, reserves the right to review any e-mail that is sent to, sent from or stored on its servers. With text messaging, Twitter and Facebook, there are a limited number of characters available. While this has lead to a “text language” involving terms such as OMG, LOL and IDK, just to name a few, the character limitations are prohibitive when compared to the amount of information that must be provided in a communication with the consumer. After providing the name of the creditor, amount of the debt and the mini-Miranda, there are limited or no characters remaining for state special text requirements or identifying the name of the collection agency or name of the debt collector. When dealing with calls and text messages to cellular telephones, there is a concern when using an auto-dialing device without the consumer’s prior express consent, not to mention the consumer could potentially incur a charge for the text message or call. In addition to concerns of using a dialer to call a cell phone, the Telephone Consumer Protection Act or TCPA prohibits leaving prerecorded voice messages on any residential or cellular phone without the consumer’s consent. These concerns
30 15 U.S.C. § 1692c(a)(1) (§ 805(a)(1)). 31 FTC Statements of General Policy or Interpretation Staff Commentary on the FDCPA, 53 Fed. Reg. 50097, 50103-04 (Dec. 13, 1988).
barely scratch the surface of issues regarding incorporating different methods of technology into the collection process. As the FDCPA was enacted prior to most of these technological advancements, the FDCPA does not address the use of these emerging technologies. Debt collectors should consult their company policy on how their agency incorporates technology into the collection process.
Avoiding Harrassment and Abuse
Avoiding Harassment and Abuse § 806 [15 U.S.C. § 1692d]
Everyone interprets harassment and abuse differently. A debt collector must not harass or abuse the consumer, right parties or any third parties. It is difficult to define what exactly harassment and abuse are, but examples of harassing and abusive conduct are helpful to describe their meanings. Harassment and abuse are not limited to the actions specifically described in the FDCPA. Examples of harassment and abuse come out of lawsuits where a court has determined that the debt collectors’ actions were harassing and or abusive. It is important to look at the examples as examples and not to assume that a debt collector’s behavior is acceptable because something was said or done that is not specifically prohibited or described in section 806 of the FDCPA. Collection professionals need to develop a feel for when the line between effective collection practices and harassment and abuse is crossed. Debt collectors should always remain professional and never cross that line into unprofessional, unethical, harassing or abusive conduct.
Debt collectors may not use obscene or profane language in collection or skiptracing calls.32 This includes more than just swearing. It includes any language that could be offensive to the consumer or any third party. Sometimes certain language is abusive to one person but not another. If a statement would shock, anger or upset an individual, it is probably abusive. Some examples include using religious slurs and calling the consumer a deadbeat or a liar.33
Tone of voice can turn an acceptable call into a harassing or abusive call. If a debt collector yells or raises his or her voice, it could be harassing. The tone of voice or inflection of choice words can change the meaning of a statement. Harassment and abuse is not just about what a debt collector says, but how he or she says it. Debt collectors should always consider tone of voice when on a collection or skiptracing call.
Collectors can get upset or frustrated during collection and skiptracing calls. Debt collectors must learn to stay calm and professional. A heated call that turns angry can quickly turn into an abusive call. Debt collectors should determine what type of techniques will work to stay calm and professional, such as deep breathing, transferring the call to a supervisor or dispute resolution desk, politely terminating the call, asking probing questions or trying to find an alternate payment solution or money source. Debt collectors frequently find that frustration goes both ways. When dealing with an upset, irate, angry or screaming consumer, it is important to stay calm and professional and maintain control.
Prior to the FDCPA, creditors and collection agencies would advertise (or threaten to advertise) debts for sale and publish the names of the consumers in the hope that the consumer would pay out of shame and embarrassment. Although this may be an extreme example, debt collectors must be aware that attempts to embarrass the consumer into paying on the debt is harassment under the FDCPA.34
32 15 U.S.C. § 1692d(2) (§ 806(2)). 33 FTC Statements of General Policy or Interpretation Staff Commentary on the FDCPA, 53 Fed. Reg. 50097, 50105 (Dec. 13, 1988). 34 15 U.S.C. § 1692d(3) (§ 806(3)).
Avoiding Harrassment
and Abuse
Repeatedly calling the consumer and causing the phone to ring to annoy the consumer is harassment.35 When deciding whether multiple calls are harassing, courts typically look at the frequency of the calls as well as the pattern in which the calls occur.36 Debt collectors working on an automated dialer may not be in control of the dialer campaigns, which dictate how often calls are placed. The FDCPA prohibits causing a telephone to ring repeatedly. Even if no contact is made or no message is left, Caller ID will track the number and frequency of the calls, which could result in potential FDCPA liability. Some states have very specific rules addressing the frequency of attempts to contact a consumer.
The FDCPA prohibits threats of violence and threatening police action or other law enforcement activity.37 Such threats are harassment whether directed towards the consumer, right parties or third parties.
The FDCPA restricts debt collectors from threatening actions that cannot or will not be taken.38 A debt collector must have both the authority and the intent to take a specific action to notify a right party of the specific collection activity. Debt collectors cannot threaten to repossess a consumer’s car, garnish a consumer’s wages or any other action unless the debt collector has the authority as well as the intent to follow through.39 When attempting to collect debts by filing lawsuits, debt collectors need to make sure the account satisfies the creditor’s and the agency’s guidelines for filing suits. If a collection agency does not sue on debts under $1,000, a debt collector cannot threaten legal action on a debt that is less than $1,000. Each debt has a specific amount of time where a creditor can choose to file a lawsuit to attempt to collect the debt, known as a statute of limitations. When collecting on a debt that is past the statute of limitations, threatening a lawsuit on that debt violates the FDCPA.40 A few states eliminate the debt when the statute of limitations passes.41 In those states, debt collectors cannot pursue any attempts to collect the out of statute debts. Still other jurisdictions require special notices or disclosures be provided when collecting on debts that are past the statute of limitations.42
35 15 U.S.C. § 1692d(5) (§ 806(5)). 36 See Akalwadi v. Risk Mgmt. Alternatives, Inc., 336 F. Supp. 2d 492 (D. Md. 2004). 37 15 U.S.C. § 1692d(1) (§ 806(1)). 38 15 U.S.C. § 1692e(5) (§ 807(5)). 39 15 U.S.C. § 1692e(4) (§ 807(4)). 40 Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767 (8th Cir. 2001). 41 Mississippi and Wisconsin. 42 New Mexico, New York City and North Carolina.
Avoiding False and Misleading Statements
Avoiding False and Misleading Statements § 807 [15 U.S.C. § 1692e]
The FDCPA prohibits false and misleading statements during collection and skiptracing calls.43 Debt collectors may not say or imply anything that is untrue. Debt collectors cannot lie to a consumer, right party or third party in attempting to collect the debt or in attempting to obtain location information. This includes “little white lies” and lies that debt collectors think will not be discovered or will not harm the consumer or anyone else. Whether or not a collection agency is recording calls, the consumer, right party or third party might record the call. Savvy debt collectors assume every call is being recorded and make sure everything the collector says is true to avoid violating the prohibition against false and misleading statements.
Consumers are often more concerned if they believe the state or federal government is involved. The FDCPA prohibits any representation or implication that the debt collector is vouched for, bonded by or affiliated with the government.44 Debt collectors cannot misrepresent that the government is backing their collection efforts.
Another common problem is misstating the amount, legal status or character of the debt.45 Debt collectors must accurately provide the amount of the debt when communicating with right parties. Debt collectors may not imply or suggest that legal action has or is close to being filed if it is not true. In addition, debt collectors may not falsely indicate that a debt collector has a lien against the consumer’s assets or that a judgment has been obtained if the representations are not true.
In an often-quoted FDCPA decision, a judge wrote that when an attorney is involved in the collection of a debt, the consumer believes “the price of poker has just gone up.”46 Debt collectors may reference an attorney’s involvement in the collection efforts only if an attorney is actually involved in the collection efforts. A debt collector may not try to make a consumer think an attorney is involved in the debt collection when, in fact, an attorney is not so involved.
One of the abuses that occurred before the enactment of the FDCPA was the threat of imprisonment if the consumer did not pay a debt.47 While such a statement will most likely create fear in the consumer and may encourage payment, it is a clear violation of the FDCPA. The concept of a “debtor’s prison” ended long before the FDCPA was enacted. There is no justification for telling a consumer that he or she will face jail time if the debt is not paid.
43 15 U.S.C. § 1692e (§ 807). 44 15 U.S.C. § 1692e(1) (§ 807(1)). 45 15 U.S.C. § 1692e(2)(A) (§ 807(2)(A)). 46 Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996). 47 15 U.S.C. § 1692e(4) (§ 807(4)).
Avoiding False and Misleading
Statements
Some violations of the FDCPA fall into two areas. The most common example relating to false and misleading conduct is the mini-Miranda.48 The failure to give the mini-Miranda violates the requirement to provide meaningful disclosure of the debt collector’s identity49 as well as the requirement to provide the disclosure itself.50 Recent court decisions have found that a live or a pre-recorded voicemail message is a communication that requires meaningful disclosure, including the name of the collection agency and the mini-Miranda disclosure.51 Many other courts have adopted this same reasoning,52 prompting some collection agencies to leave what has come to be known as a Foti message. Other agencies do not leave voicemail messages. Debt collectors should take special care to follow their agency’s policy regarding leaving voicemail messages.
When identifying the collection agency, debt collectors must be careful to use the agency’s correct name. It is a violation of the FDCPA to use any business name other than the actual name of the agency.53 Debt collectors may provide a registered trade name of the collection agency. If the name or initials of the company are not registered as a trade name, the acronym or nickname of the company must not be used.
Some debt collectors provide information regarding debts to consumer reporting agencies (commonly known as credit bureaus). Such companies are “data furnishers.” However, this does not make the company a credit bureau or a consumer reporting agency. Debt collectors may not tell a consumer that the company is a consumer reporting agency if the company, in fact, is not a consumer reporting agency.54 Debt collectors must be careful when referencing credit reporting activities so the debt collector does not misrepresent a data furnishing collection agency as a consumer reporting agency.
48 This is an attempt to collect a debt by a debt collector and any information obtained will be used for that purpose. 49 15 U.S.C. § 1692d(6) (§ 806(6)). 50 15 U.S.C. § 1692e(11) (§ 807(11)). 51 Foti v. NCO Fin. Sys., Inc., 424 F. Supp. 2d 643 (S.D.N.Y. 2006). 52 See, e.g., Inman v. NCO Fin. Sys., Inc., Civ. A. No. 08-5866, 2009 WL 3415281 (E.D. Pa. Oct. 21, 2009); Niven v. Nat’l Action Fin. Servs., Inc., No. 8:07-CV-1326-T-27TBM, 2008 WL 4190961, *2 (M.D. Fla. Sept. 10, 2008); Ramirez v. Apex Fin. Mgmt., LLC, 567 F. Supp. 2d 1035 (N.D. Ill. 2008); Baker v. Allstate Fin. Servs., Inc., 554 F. Supp. 2d 945, 952 (D. Minn. 2008); Edwards v. Niagara Credit Solutions, Inc., 586 F. Supp. 2d 1346, 1359 (N.D. Ga. Nov. 13, 2008); Costa v. Nat’l Action Fin. Servs., No. CIV. S-05-2084 FCD/KJM, 2007 WL 4526510 (E.D. Cal. Dec. 19, 2007); Masciarelli v. Richard J. Boudreau & Assocs., 529 F. Supp. 2d 183 (D. Mass. 2007). 53 15 U.S.C. § 1692e(14) (§ 807(14)). 54 15 U.S.C. § 1692e(16) (§ 807(16)).
Avoiding Unfair Practices
Avoiding Unfair Practices § 808 [15 U.S.C. § 1692f]
The FDCPA prohibits “unfair practices” in debt collection attempts. Debt collectors may not use any unfair or unconscionable means to collect a debt. As with the other sections discussed, the FDCPA provides examples of unfair practices, but does not list all types of unfair practices that could violate the statute.55
The amount a consumer owes on a debt is limited by the agreement between the creditor and the consumer. The creditor may not attempt to collect more than what is owed. Debt collectors have the same limitations. It is an unfair practice to try to collect more than is legally owed.56
One of the provisions of the FDCPA allows an agency to accept checks from a consumer that are dated for cashing or processing in the future. This is often done when there is an agreed upon payment plan. Rather than trust that the consumer will remember to send in future payments, the agency requires “post dated” checks that the agency can deposit at the appropriate date. The FDCPA requires a written notice be sent to the consumer 3 to 10 days before the agency deposits a check post-dated by more than 5 days.57 Failure to provide this notice or depositing a check before the date on the check is an unfair practice. This section generally will require written notice to the consumer before processing any payment postdated by more than 5 days, including credit or debit card transactions. The notice serves as a reminder to the consumer that the payment will be processed so the consumer will have money available to cover the payment, or provide the consumer with enough time to cancel the payment if he or she does not have enough money for the payment.
The prohibition against unfair practices tends to be a “catch-all” provision. Most violations of other sections could also violate this section. Examples include causing a consumer to incur charges by concealing the true purpose of the call.58 While this was more common with placing collect telephone calls, it is also a concern with the increased use of cellular phones. Some consumers are charged for the call or the call counts against the consumer’s allotment of minutes in the cellular plan. As with many areas under the FDCPA, contacting consumers by cellular phone is an evolving concern as technology changes.
Communication using postcards is a violation of the FDCPA.59 Post cards are an “open face” communication, which means anyone, including third parties, can see what the postcard says and find out about the debt. There are similar concerns about communications sent by fax or by e-mail to a consumer. There are a number of concerns regarding use of technology that was not available when the FDCPA was enacted. Debt collectors should refer to their supervisor and the collection agency’s policies and procedures when communicating with these methods.
55 15 U.S.C. § 1692f (§ 808). 56 15 U.S.C. § 1692f(1) (§ 808(1)). 57 15 U.S.C. § 1692f(3) (§ 808(3)). 58 15 U.S.C. § 1692f(5) (§ 808(5)). 59 15 U.S.C. §1692f(7) (§808(7)).
The Danger of Overshadowing The Danger of Overshadowing
§ 809 [15 U.S.C. § 1692g]
Collection agencies must give the consumer certain information about the debt and how to dispute the debt. The information must be provided to the consumer within five days of the initial communication with the consumer. To make sure the information is provided within this timeframe, the information is generally sent to the consumer in a letter that is sent shortly after the debt is placed with the collection agency. The details that are provided include: the amount of the debt; the name of the creditor; information about how to dispute the debt; how to request documentation supporting the debt; and what to do if the consumer does not recognize the name of the creditor.60 This information is known as the “validation notice.” Once the consumer receives the validation notice, the consumer has 30 days to dispute the debt. The 30-day time frame is known as the “validation period.” Remember, the 30-day time frame starts when the consumer receives the notice, not when the notice is sent.
If the consumer sends a written dispute to the collection agency within the validation period, collection efforts must stop.61 The collection agency then has two choices: either provide the consumer with verification of the debt (documentation supporting the debt); or cease all collection activity.62 If the collection agency does not have or cannot obtain supporting documentation from the creditor, collection activity must remain ceased.
If the consumer disputes the debt verbally, but does not send a written dispute, collection efforts do not have to stop and the agency does not have to send verification. However, the collection agency will have to follow its policies and procedures for handling a dispute.63 The collection agency may decide to send supporting documentation about the debt based on a verbal dispute. No matter when the consumer verbally disputes the debt, the collection agency may not assume the debt is valid. This means the collection agency may have to find additional support for attempting to collect the debt or might not be able to collect the full amount of the debt. Payments made on the debt cannot be applied to the disputed portion of the debt. For example, a consumer might disagree with the late fees or the amount of interest included in the full balance. Payments may not be applied to the disputed portion of the debt. The creditor may need to justify the amounts being charged for the collection agency to continue collecting on the disputed portion of the debt.
Because the consumer has a limited amount of time to dispute the debt, debt collectors must be careful about what they say during the 30-day validation period. Debt collectors cannot say anything that would be confusing to the consumer or that would make the consumer think the 30-day time frame to dispute the debt no longer exists. It is a violation of the FDCPA to confuse the consumer, contradict the information in the validation notice, or say anything that might cause the consumer to ignore the right to dispute the debt. This is “overshadowing.”64 The validation notice must be clear to the consumer. There are several ways in which overshadowing can occur.
60 15 U.S.C. § 1692g (§ 809). 61 15 U.S.C. § 1692g(b) (§ 809(b)). 62 Jang v. A.M. Miller & Assoc., 122 F.3d 480, 483 (7th Cir. 1997). 63 See the next section on “Responding to Disputes” for more information. 64 15 U.S.C. § 1692g(b) (§ 809(b)).
The Danger of Overshadowing
Collection agencies might have authority to settle the debt for less than the full balance owed. Some collection agencies will send out collection letters that make an offer to settle the debt. Debt collectors need to know what offer was made to the consumer so a contradictory offer is not made in a collection call. If the letter has an expiration date, the debt collector cannot change that date in a phone call by having the date expire sooner than the letter.
Debt collectors may offer the consumer a settlement of the debt, if authorized by both the creditor and the collection agency. When making a settlement offer, debt collectors must make sure the offer is within the creditor’s settlement guidelines. If the settlement has an expiration date, the settlement offer may not expire before the validation period expires. Any settlement offer that might cause the consumer to give up the right to dispute the debt to take advantage of the settlement offer violates the FDCPA. All settlement offers or payment arrangements should be well documented in the collection notes so other collectors do not contradict the offer. This is also important so collection letters do not contradict offers made in collection calls.
Demands for payment can overshadow the validation period even if the demand does not offer a settlement. Demands for payment with a due date that occurs before the validation period expires overshadow the validation notice and violate the FDCPA. For example, a demand for payment by Friday will violate the FDCPA if the validation notice was sent on Monday. The consumer might not have received the letter yet. Even if the consumer did receive the letter, he or she still has time to exercise the rights listed in the letter. A demand for payment cannot influence the consumer to give up his or her right to dispute the debt. Creating a false sense of urgency or making the consumer feel like he or she has to give up the right to dispute the debt will overshadow the validation period. Even if a due date is not specified, words like, “immediately,” “as soon as possible” and “urgent,” conflict with the 30- day period in the validation notice.
Telling the consumer the collection agency will report the debt to a consumer reporting agency if he or she does not pay or threatening legal action can also overshadow the validation notice. To avoid getting sued for a debt or to avoid having a debt listed on a consumer report, the consumer might give up his or her right to dispute the debt, even if he or she believes the debt does not belong to him or her. When authorized to take these types of actions, debt collectors must be very careful in how payment is demanded. Even if the agency or the creditor will report the debt to a consumer reporting agency or will file suit on the debt, the consumer still has the right to dispute the debt. Do not contradict that right or confuse the consumer into giving up that right.
Responding to Disputes Responding to Disputes
§ 809(b) [15 U.S.C. § 1692g(b)] § 807(8) [15 U.S.C. § 1692e(8)]
Consumers can dispute their debts in many different ways. How and when the dispute is raised makes a difference in how collection agencies respond to the dispute. A consumer dispute simply means that the consumer questions or refuses responsibility for the debt. There are no specific words that a consumer must say to dispute the debt. In fact, the consumer might not even use the words, “I dispute this debt.” More often than not, a consumer will dispute the debt by saying something like: “That’s not my debt;” “I don’t owe that much;” “I was the victim of identity theft;” “I thought I paid that off;” “I never saw that doctor;” or “They told me I wouldn’t be charged interest or a late fee.”
Debt collectors must listen carefully for any indication that a consumer disputes a debt. Collection agencies should have policies and procedures to guide debt collectors in handling consumer disputes and what to do in response to the dispute. It is not for the debt collector to decide if a dispute is legitimate. Rather, the debt collector must document the dispute very clearly in the collection notes and properly code the account.
How a consumer submits a dispute impacts the response a debt collector or collection agency must take to respond to the dispute. A consumer can dispute the debt verbally while on the phone with a collector, or a consumer can dispute the debt in writing by sending a letter to the agency or the creditor.
If the consumer disputes the debt in writing within the 30 day validation period the collection agency will proceed in one of two ways. The agency will either suspend all collection activity until it receives and sends back up documentation regarding the debt to the consumer or all collection attempts on the debt will be ceased.65 Once back up documentation supporting the debt is sent to the consumer, collection efforts can start again.
Some collection agencies do send back up documentation, or verification of the debt, in response to a verbal dispute during the validation period, but this is not required by the FDCPA. After the 30-day validation period, a consumer can still dispute the debt verbally or in writing. The dispute must be clearly noted in the collection notes. Under the FDCPA, the collection agency does not have to stop collecting and does not have to send back up documentation but there are very specific guidelines regarding processing payments on a disputed debt. Under the FDCPA, payments cannot be credited to a disputed debt. Generally, if the consumer disputes the entire debt, he or she will not send a payment. If the consumer has more than one debt, payments can be applied to the debts that are not disputed. If the consumer disputes part of the debt, such as the interest or late fees, a payment can be applied to the principle balance, but not applied to the interest or late fees. Even if the 30-day validation period is over, a disputed debt must be handled carefully and be well-documented in the collection notes.
65 Jang v. A.M. Miller & Assoc., 122 F.3d 480, 483 (7th Cir. 1997).
Responding to Disputes
A collection agency that reports debts to a consumer reporting agency is a “data furnisher.” It is extremely important that data furnishers identify disputed debts and report the dispute to the consumer reporting agency. This is why it is so important to properly update the collection notes when a consumer verbally disputes a debt. The Fair Credit Reporting Act, or FCRA, has additional rules that data furnishers must follow for disputed debts. The FCRA and section 807(8) of the FDCPA require data furnishers to notify the consumer reporting agency that a debt is disputed. Debt collectors must listen carefully when talking to a right party in case he or she verbally disputes the debt. Debt collectors will need to know how to update the account to make sure the dispute is reported to the consumer reporting agency. It does not matter if the debt collector disagrees with the consumer’s dispute or thinks the dispute is not valid. Sending verification of the debt does not eliminate the consumer’s dispute and that dispute must be reported. The consumer may still dispute the debt even after the documentation is provided.
A consumer can also dispute a debt that has been settled or paid in full. The dispute must be documented in the collection notes. If your agency is a data furnisher, the debt must be marked as disputed with the consumer reporting agency. In addition to violating the FCRA, a well known court decision held that it violates the FDCPA when a data furnishing collection agency fails to mark the debt as disputed on the consumer report.66
66 Brady v. Credit Recovery Co., Inc., 160 F.3d 64 (1st Cir. 1998).
Cease Communication
Cease Communication Requests § 805(c) [15 U.S.C. § 1692c(c)]
Consumers can stop debt collectors from communicating with them in a number of ways.
Bankruptcy If a consumer files for bankruptcy, the Bankruptcy Code imposes the “automatic stay” which requires all communications with the consumer must stop as soon as the bankruptcy case is filed. If the consumer tells a debt collector that he or she has filed for bankruptcy, the debt collector may not demand payment. The only information the debt collector can request is information about the bankruptcy filing, including the attorney’s name, phone number and address, the date the consumer filed for bankruptcy, the chapter of bankruptcy that was filed and the case number. This information must be documented in the collection notes and the account properly coded so no phone calls will be placed and no collection notices will be sent until the bankruptcy filing can be confirmed. Debt collectors should ask if the consumer has an attorney and get the attorney’s contact information. As discussed earlier, when the consumer is represented by an attorney, the consumer is no longer a “right party.” Debt collectors are not stopped from communicating with the consumer if the consumer is merely thinking about filing but has not yet filed for bankruptcy. Collection efforts must cease immediately when a consumer files for bankruptcy, whether or not the collection agency receives a written or verbal notice of the filing.
Verbal A consumer might tell a debt collector to stop contacting him or her during a collection call. This type of general request to stop contact may not require a debt collector to stop all communication. However, this verbal request may put the debt collector on notice that the current time or place is inconvenient for the consumer to receive collection calls.67 Such a response from a consumer requires the collection notes be properly documented and further calls at that time or place be ceased. The consumer might not use the word “inconvenient” to describe the time or place; however, verbal requests to limit inconvenient contacts must be honored.
Place of Employment A debt collection phone call or letter to the consumer’s place of employment also presents some concern. Some consumers cannot receive calls at work. If a consumer tells a debt collector he or she cannot take calls at work, this notice must be honored. The work number must be removed from the collection notes and the account updated the account to show that no contact is allowed at the consumer’s place of employment. The consumer does not have to put the request in writing. However, if a consumer asks a debt collector not to call him or her at work, collection efforts may continue by calling the consumer at home
67 15 U.S.C. § 1692c(a)(1) (§ 805(a)(1)).
Cease Communication Requests
or another number. Examples of what a consumer could say include: “You can’t call me at work;” “My boss doesn’t let me take personal calls;” or “Don’t call me here anymore.” Such requests must be honored.
Calls to a consumer’s workplace might also be inconvenient based on the consumer’s type of work. Debt collectors should avoid calling a consumer who works in a restaurant during “rush” or mealtimes, avoid calling teachers during school hours, and avoid calling construction workers off of a job site.
Written Some consumers will send a letter demanding that communication regarding debt collection be stopped or limited in some way. This type of letter is known as a cease communication notice. The FDCPA states that any written request to stop or to limit contact with a consumer must be obeyed.68 After receiving a cease communication notice, a collection agency can contact the consumer one time, but may not make a demand for payment. The purpose of this final contact will be discussed later in this section.
If the consumer sends a letter that does not specifically demand that a debt collector stop contacting him or her but rather states that he or she refuses to pay the debt, that notice must be treated as a cease communication notice. Section 805(c) of the FDCPA specifically references this situation. When a consumer puts in writing that he or she refuses to pay the debt, debt collectors cannot communicate further with the consumer.69 A consumer’s refusal to pay might read something like: “You can keep trying, but I’m not paying;” “You’re not getting a dime out of me;” “Rejected;” or “I’m not paying this.” Debt collectors and administrative staff who receive letters from consumers should read the letter carefully to identify any contact limitations, refusals to pay, cease communication notices, requests for verification of the debt or other demands.
Final Communication After the consumer sends a written cease notice or refuses to pay in writing, a collection agency may, but does not have to, contact the consumer one more time but only for a very specific reason. Some, but not all collection agencies, will take this opportunity to notify the consumer what the agency or creditor will do now that collection efforts have been stopped. However, the final contact cannot demand payment. However, this final contact can do one of three things: tell the consumer that further communication will stop; tell the consumer what kind of action the agency or the creditor usually take under similar circumstances; or tell the consumer what the agency or the creditor intends to do about the debt.70 Debt collectors should know their collection agency’s policies and procedures for whether or not to make this final contact and whether such final contact should be in writing or on the phone. It is important that the information provided to the consumer be true. The final contact with the consumer may NOT demand payment.
68 15 U.S.C. § 1692c(c) (§ 805(c)). 69 15 U.S.C. § 1692c(c) (§ 805(c)). 70 15 U.S.C. § 1692c (§ 805(c)).
What Can Go Wrong? What Can Go Wrong?
§ 813 [15 U.S.C. § 1692k] § 814 [15 U.S.C. § 1692l]
Collecting consumer debts also has some risks. One of those risks is having a right party, third party or the creditor make a complaint against the debt collector and/or the collection agency. Complaints can take many forms and can come from many different sources. The following information describes the types of complaints and the consequences or potential consequences that can arise from each type of complaint.
Creditor Complaints The creditor could complain about collection activities either through its own investigation or based on information received from a consumer. A complaint from the creditor requires a serious and well thought out response. The creditor is the agency’s client and if the client is not satisfied, the agency may lose that creditor’s business. This is a substantial penalty for the agency and it may reflect poorly on any debt collectors involved or named in the complaint.
Better Business Bureau Every state has a watchdog organization called the Better Business Bureau (“BBB”). The BBB accepts and investigates complaints made by consumers or companies against businesses. The Better Business Bureau does not have the authority to impose fines or file charges; however, it is not a good idea to ignore complaints from the BBB. Better Business Bureau complaints against a debt collector or collection agency may reflect poorly on both the collector and agency, particularly if there is no response to the complaint. As creditors look for collection agencies to hire, they will often review an agency’s history of complaints and the resolution percentage with the Better Business Bureau. As with a creditor complaint, it is important for the debt collector and the collection agency to provide an accurate and well documented response to all Better Business Bureau complaints.
Consumer Complaints & Pre-Litigation Demands A right party or third party has the option to seek advice from an attorney regarding alleged violations of the FDCPA. If an attorney gets involved, the attorney may send a letter detailing the violation and outlining a proposed settlement for the collection agency to avoid a lawsuit. It is important for the collection agency to fully investigate the alleged violation immediately after receiving the demand letter from the attorney. It is also important for the debt collector to cooperate with the collection agency in the investigation. It is imperative for a debt collector to be honest about what happened.
What Can Go Wrong?
Lawsuits If the matter is not resolved, the attorney representing the consumer may proceed with a lawsuit. If the court finds a violation of the FDCPA, the person bringing the suit (the plaintiff ) can be awarded a significant amount of money.
Actual Damages One type of money damages the consumer can receive is by having actual damages, which includes out-of-pocket expenses, money damages for embarrassment, emotional distress, humiliation and mental anguish.71 Courts have awarded actual damages ranging from less than $65072 to more than $90,000.73 There are even a few cases, based on a collector’s outrageous behavior, where the court has awarded actual damages exceeding a million dollars. There is no limit to the amount of actual damages a court can award under the FDCPA.
Statutory Damages In addition to actual damages, a court may also award statutory damages of up to $1,000.74 When deciding statutory damages, courts consider how often the debt collector failed to comply with the FDCPA (frequency), how inappropriate the conduct was (nature of noncompliance or severity) and whether or not the conduct was intentional (persistence).75 Just because a complaint is filed does not mean the debt collector or the collection agency did anything wrong. The consumer must prove the FDCPA was violated.
Costs and Attorney's Fees The FDCPA also has a provision requiring the debt collector or collection agency to pay the attorney’s fees and other costs incurred by the plaintiff if the plaintiff wins the lawsuit.76 This is in addition to having to pay an attorney to defend the debt collector or collection agency. Defense fees add up quickly and are only part of the cost equation. For example, complaints and FDCPA violations may damage the agency’s reputation, cause current clients to question whether or not they should continue to do business with the agency and will most likely put the agency at a disadvantage when bidding on new business. Confirmed FDCPA violations might need to be reported to state authorities, depending on individual state laws. If the violation is serious enough, the agency could lose its collection license or might be denied the opportunity to renew its collection agency license in the future.
Class Action When there is a wide spread violation, an entire group, or class, of individuals can come together in one lawsuit against the debt collector and/or the collection agency. This is a class action lawsuit. This is most common when there is an alleged violation in a letter that was sent to a consumer. However, there are instances where there is a pattern or practice of harassing and abusive telephone collection techniques and a class of individuals could file a class action lawsuit based on the abusive collection calls, or based on excess unauthorized fees added to collection accounts. Remedies available in an individual lawsuit versus a class action lawsuit are different. In cases involving a class action, each individual plaintiff named
71 15 U.S.C. § 1692k(a)(1) (§ 813(a)(1)). 72 Jones v. Vest, No. 00-CV-287, 2000 WL 33797103 (E.D. Va. Nov. 7, 2000). 73 Myers v. LHR, Inc., 543 F. Supp. 2d 1215 (S.D. Cal. 2008). 74 15 U.S.C. § 1692k(a)(2) (§ 813(a)(2)). 75 15 U.S.C. § 1692k(b)(1) (§ 813(b)(1)). 76 15 U.S.C. § 1692k(a)(3) (§ 813(a)(3)).
What Can Go Wrong?
in the lawsuit can be awarded up to $1,000.77 In addition, a court can award $500,000 or one percent of the debt collector’s net worth (whichever is less) to the class of individuals.78
State and Federal Authorities Complaints can also be filed with State and Federal authorities, such as the Attorney General’s office, the Federal Trade Commission or the Bureau of Consumer Financial Protection.79 Based on the complaint, a State or Federal authority could file suit for FDCPA or state law violations. In these cases, the collection agency may have to pay the government’s costs of investigation or to file suit.
If a creditor or a state or federal authority receives enough complaints about a debt collector or collection agency, the state or federal authority might launch a full investigation or a comprehensive audit of all of the agency’s policies and procedures. Investigations and audits are time consuming and very expensive. No matter how the investigation or audit ends, the agency will have high costs to defend the investigation and handle any public relations costs to the collection agency’s reputation. Any type of complaint must be taken it seriously, the claims investigated and a response sent by the deadline. Failure to respond to complaints or not addressing the issues that caused the complaint can result in serious problems and financial hardship for both the collection agency and the debt collector.
Individual Liability Individual debt collectors can be sued personally for violations of the FDCPA.80 A consumer, third party, or state or federal authority can file suit against a debt collector personally for any improper actions. The debt collector will have to defend him or herself and/or pay for an attorney to assist in the defense. If a court finds a violation, the debt collector will be responsible for the money damages detailed earlier. In addition, the debt collector could lose his or her debt collection license. This might affect whether or not the debt collector can obtain a new license or whether or not a different collection agency will hire the individual. Violating the FDCPA can have a big impact on a debt collector’s future in the collection industry.
77 15 U.S.C. § 1692k(a)(2)(B)(i) (§ 813(a)(2)(B)(i)). 78 15 U.S.C. § 1692k(a)(2)(B)(ii) (§ 813(a)(2)(B)(ii)). 79 15 U.S.C. § 1692l (§ 814). The Bureau of Consumer Financial Protection is a federal government agency created in 2010, which will have rulemaking and enforcement authority under the Fair Debt Collection Practices Act. 80 15 U.S.C. § 1692k(a) (§ 813(a)).
Appendix A: Text of the Fair Debt Collection Practices Act
Appendix A: Text of the Fair Debt Collection Practices Act § 801 Short title
§ 802 Congressional findings and declaration of purpose
§ 803 Definitions
§ 805 Communication in connection with debt collection
§ 806 Harassment or abuse
§ 808 Unfair practices
§ 812 Furnishing certain deceptive forms
§ 813 Civil liability
§ 814 Administrative enforcement
§ 815 Reports to Congress by the Commission; views of other Federal agencies
§ 816 Relation to State laws
§ 817 Exemption for State regulation
§ 818 Exception for certain bad check enforcement programs operated by private entities
§ 819 Effective Date
§ 801 . [15 U .S .C . § 1601] This title may be cited as the “Fair Debt Collection Practices Act.”
§ 802 . Congressional findings and declaration of purpose [15 U .S .C . § 1692] (a) Abusive practices There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
(b) Inadequacy of laws Existing laws and procedures for redressing these injuries are inadequate to protect consumers.
(c) Available non-abusive collection methods Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.
Appendix A: Text of the Fair
Debt Collection Practices Act
(d) Interstate commerce Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.
(e) Purposes It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.
§ 803 . Definitions [15 U .S .C . § 1692a] As used in this subchapter—
(1) The term “Commission” means the Federal Trade Commission.
(2) The term “communication” means the conveying of information regarding a debt directly or indirectly to any person through any medium.
(3) The term “consumer” means any natural person obligated or allegedly obligated to pay any debt.
(4) The term “creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
(5) The term “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 which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
(6) The term “debt collector” means any person who uses any 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) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f [§ 808(6)] of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include—
(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
(B) any 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 persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
(C) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
(D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
(E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
(7) The term “location information” means a consumer’s place of abode and his telephone number at such place, or his place of employment.
(8) The term “State” means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.
§ 804 . Acquisition of location information [15 U .S .C . § 1692b] Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall—
(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
(2) not state that such consumer owes any debt;
(3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) not communicate by post card;
(5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
(6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to communication from the debt collector.
§ 805 . Communication in connection with debt collection [15 U .S .C . § 1692c] (a) Communication with the consumer generally Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt—
(1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o’clock antemeridian and before 9 o’clock postmeridian, local time at the consumer’s location;
(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or
(3) at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.
(b) Communication with third parties Except as provided in section 1692b [§ 804] of this title, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.
(c) Ceasing communication If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except—
(1) to advise the consumer that the debt collector’s further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail, notification shall be complete upon receipt.
(d) “Consumer” defined For the purpose of this section, the term “consumer” includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.
§ 806 . Harassment or abuse [15 U .S .C . § 1692d] A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.
(2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.
(3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 1681a [§ 603(f )] or 1681b [§ 604(3)] of this title.
(4) The advertisement for sale of any debt to coerce payment of the debt.
(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.
(6) Except as provided in section 1692b [§ 804] of this title, the placement of telephone calls without meaningful disclosure of the caller’s identity.
§ 807 . False or misleading representations [15 U .S .C . § 1692e] A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.
(2) The false representation of—
(A) the character, amount, or legal status of any debt; or
(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.
(4) The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.
(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.
(6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to—
(A) lose any claim or defense to payment of the debt; or
(B) become subject to any practice prohibited by this subchapter.
(7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.
(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.
(9) The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.
(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.
(12) The false representation or implication that accounts have been turned over to innocent purchasers for value.
(13) The false representation or implication that documents are legal process.
(14) The use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization.
(15) The false representation or implication that documents are not legal process forms or do not require action by the consumer.
(16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by section 1681a [§ 603(f )] of this title.
§ 808 . Unfair practices [15 U .S .C . § 1692f] A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution.
(4) Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.
(5) Causing charges to be made to any person for communications by concealment of the true purpose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees.
(6) Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if—
(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B) there is no present intention to take possession of the property; or
(C) the property is exempt by law from such dispossession or disablement.
(7) Communicating with a consumer regarding a debt by post card.
(8) Using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.
§ 809 . Validation of debts [15 U .S .C . § 1692g] (a) Notice of debt; contents Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty- day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) Disputed debts If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this title may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of

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