11. What is the “Fair Debt Collection Practices Act”?
The Fair Debt Collection Practices Act (FDCPA) was passed to protect consumers from abusive practices by debt collectors. It establishes limitations on debt collection practices, provides a method for disputing uncertain debts, and prescribes remedies for violation of the Act. The FDCPA applies only to consumer debts collected by debt collectors — business debts are not covered. A “consumer debt” is a debt established for personal, family, or household purposes. A debt collector is defined as “any person who uses any instrumentality of interstate commerce or the mail 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.” In other words, the FDCPA applies to businesses whose primary business is the collection of third-party, consumer debt.
• Note: The Act does not apply to individuals or business collecting their own debts.
• Example: Examples of debt collectors include debt collection agencies and attorneys.
Information from Debt Collector
A debt collector must provide the debtor with the following information:
• Identification – Any communication from to the debtor must identify the collector and provide notice that any information obtained will be used for the purpose of collecting a debt.
• Amount – The communication must contain the amount of the debt.
⁃ Note: The debt must represent the original debt and be in accordance with applicable law regarding interest and fees.
• Creditor Information – The communication must contain the name of the creditor to whom debt is owned.
⁃ Note: This includes the name of the collection agency and the owner of the original debt.
• Notice of Dispute – Within 5 days of making initial contact, the collector must provide notice that the debtor has 30 days to dispute the validity of the debt.
⁃ Note: Failure to dispute the validity of the debt allows the collector to presume that it is valid.
• Verification of Debt – If a debtor disputes the validity of the debt, the collector must provide information verifying that the debt is valid and, if requested, the name of the original creditor. If the original debt was reported to a credit reporting agencies for inclusion on the debtor’s credit profile, notice of any dispute must also be reported to the credit reporting agencies.
⁃ Note: Requiring a debt collector to validate the debt may be difficult when the collector is a third-party agency that purchases debts. It can take time and be difficult for the collector to provide verifying information.
The FDCPA places the following limits on debt collection practices:
• Collection Hours – Collectors may only telephone consumers within the hours of 8:00 a.m. to 9:00 p.m.
• Workplace Restrictions – A debt collector may not contact the debtor at her place of employment or contact the employer once made aware that it is unwelcome by the employee or employer.
• Abusive Collection Practices – A collector cannot employ abusive practices to collect the debt.
⁃ Example: This may include excessive, harassing phone calls, or abusive language.
• Deceptive Practices – The debt collector is prohibited from using deceptive practices or misrepresentations in order to collect the debt.
⁃ Example: The debt collector cannot incorrectly represent that it is an attorney, law enforcement officer, or threaten arrest or prosecution for failure to pay the debt. Further, the debt collector cannot file or threaten to file a false credit report against the debtor.
• Publicly Communicating Debt – The debt collector is prohibited from disclosing and discussing the debt with those other than the debtor, the debtor’s spouse, or representative. Further, the collector may not publish the debt publicly or list the debtor on a debt collection list. This prohibition extends to communication methods that are used to identify and embarrass debtors.
⁃ Note: The collector may not contact the debtor if aware that she is represented by legal counsel, unless the attorney will not respond. The collector may make limited contact with friends, family, neighbors, or co-workers, but only if necessary to locate the debtor. The collector may not contact any third party more than once. The collector may employ a process known as “skip tracing” to locate the debtor, but it cannot announce the existence of a debt.
⁃ Example: The debt collector cannot mail or otherwise use notification print, postcards, telegrams, or other displays that are deemed to identify and seek to embarrass the debtor. She may, however, indicate her business name on the correspondence.
• Collection Amount – Debt collectors may only seek to collect an amount representing by the original debt and in accordance with state law.
⁃ Note: State law may allow the accrual of interest and other fees.
• Request to Cease Communication – Consumers may provide collectors with written notice that the debtor refuses to pay (disputes) the asserted debt and request the collector cease any further contact. Once the collector receives this written notice, she cannot contact the consumer except to notify the debtor that collection efforts are halted or that the debtor intends to pursue legal action.
• Legal Representative – If a debtor provides notice to the collector that she is represented by legal counsel, the debt collector may not contact the debtor and may only communicate with a legal representative about the debt.
• Verification of Debt – If the debtor requests verification of the debt, the collector may not pursue collection efforts until the debt is verified.
⁃ Note: For this prohibition, collection efforts does not include filing a lawsuit. A debt collector or the creditor may begin a legal action at any time to recover the amount owed.
Enforcement of the FDCPA
The CFPB is charged with enforcing the FDCPA. The CFPB may initiate investigations and pursue civil or criminal actions against violators. Consumers may also file a civil action against debt collectors violating the FDCPA. A plaintiff may recover actual damages, statutory damages, attorney’s fees, and court costs from debt collectors. A debt collector may avoid liability by demonstrating that violations are unintentional and the result of a good faith error. Likewise, a consumer can be responsible for attorney’s fees if the court determines that the consumer filed the action in bad faith.
• Note: Numerous state laws also regulate debt collection. The FDCPA does not preempt state laws regulating debt collections so long as they do not conflict with enforcement of the FDCPA.
• Discussion: How do you feel about the objectives behind the FDCPA? Do you think the disclosure provisions are adequate? Do you think that the disclosure requirements and prohibitions achieve this objective? Why or why not?
• Practice Question: Erin is an attorney who routinely represents business clients. ABC Corp is a client and sends Erin a request to undertake collection efforts against Jerry, a customer of ABC Corp. If Erin communicates with Jerry about the debt, what must she disclose to him? What are the limits on the means that Erin can employ to collect the debt? If Erin employs abusive practices in collecting the debt, what are Jerry’s options in protecting his rights?