The Fair Debt Collection Practices Act (FDCPA) regulates the collection practices of third-party debt collectors and law firms engaged in collections. The FDCPA is found at 15 USC 1692 et seq. It was designed to protect consumers by eliminating abusive, deceptive, and unfair debt collection practices. It also protects reputable debt collectors and law firms from unfair competition. Below is a comprehensive outline of restrictions and requirements that debt collectors must follow to ensure FDCPA compliance.
When does the FDCPA apply?
The FDCPA applies only to the collection of debt incurred by a consumer primarily for personal, family, or household purposes. It does not apply to business or commercial loans.
The FDCPA defines a “debt collector” as “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.” The definition generally applies to third-party collectors such as collection agencies and law firms but excludes in-house collectors who collect the debts of a creditor in its own name.
Communicating with the consumer and third parties:
For communications with a consumer or third party in connection with the collection of a debt, the term consumer is defined to include the borrower’s spouse, parent or guardian (if the borrower is a minor), or executor or administrator (if the borrower is deceased). Generally, communications with third parties are prohibited. However, the consumer may give the debt collector express permission to contact other third parties.
In addition, a debt collector who is unable to locate a consumer may ask a third party for the consumer’s location information, including the consumer’s home address, telephone number, and place of employment. The debt collector must give his or her name and must state that he or she is confirming or correcting information about the consumer’s location. Unless specifically asked, the debt collector may not name the law firm or collection agency, and under no circumstance should the collector reveal that the consumer owes a debt. No third party may be contacted more than once unless the collector believes that the information from the first contact was wrong or incomplete and that the third party has since received better information, or unless the third party specifically requests additional contact. Written communication with a third party regarding the consumer’s whereabouts is allowed only if the envelope or content of the communication does not indicate the nature of the collector’s business.
A debt collector may not communicate with a consumer under certain circumstances, specifically:
- At any unusual time (generally before 8:00 a.m. or after 9:00 p.m. local time) or at any place that is inconvenient to the consumer, unless the consumer has given permission for such contact;
- At the consumer’s place of employment if the collector has reason to believe the employer prohibits such communications;
- If the debt collector knows that the consumer has retained an attorney for the debt and can easily ascertain the attorney’s name and address (all contact must be with that attorney unless the attorney is unresponsive or agrees to allow direct communication with the consumer);
- When a consumer requests that the debt collector cease further communication or refuses to pay the debt in writing.
Harassment and abuse:
A debt collector may not harass, oppress, or abuse any person. Specifically, a debt collector may not:
- Use or threaten to use violence or other criminal means to harm the physical person, reputation, or property of any person;
- Use obscene, profane, or abusive language;
- Publish a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency;
- Advertise a debt for sale to coerce payment;
- Annoy, abuse, or harass persons by continuously causing their telephone to ring;
- Fail to identify himself or herself after calling the consumer.
False or misleading representations:
A debt collector may not use any false, deceptive, or misleading representation. Specifically, a debt collector may not:
- Falsely represent or imply that he or she is affiliated with the United States or any state government, including the use of any badge, uniform, or similar identification;
- Falsely represent the character, amount, or legal status of the debt, or of any services rendered, or compensation he or she may receive for collecting the debt;
- Falsely represent or imply that he or she is an attorney or that communications are from an attorney;
- Falsely represent or imply 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 actually intended by the debt collector or creditor;
- Threaten to take any action that is not legal or actually intended;
- Falsely represent or imply that the sale, referral, or other transfer of the debt will cause the consumer to lose a claim or a defense to payment, or become subject to any practice prohibited by the FDCPA;
- Falsely represent or imply that the consumer committed a crime;
- Threaten or communicate false credit information, including the failure to identify a debt as disputed;
- Represent documents as authorized, issued, or approved by any court, official, or agency of the United States or any state government;
- Use any false representation or deceptive means to collect or attempt to collect a debt or to obtain information about a consumer;
- Fail to disclose in the initial written communication with the consumer, and the initial oral communication if it precedes the initial written communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose; in addition, the debt collector must disclose in subsequent communications that the communication is from a debt collector (these disclosures do not apply to a formal pleading made in connection with a legal action);
- Falsely represent or imply that accounts have been sold to innocent purchasers for value;
- Falsely represent or imply that documents are legal process when they are not;
- Use any name other than the true name of the debt collector’s business;
- Falsely represent or imply that documents are not legal process forms or do not require action by the consumer;
- Falsely represent or imply that the debt collector operates or is employed by a consumer reporting agency.
A debt collector may not use unfair or unconscionable means to collect or attempt to collect a debt. Specifically, a debt collector may not:
- Attempt to collect any amount not authorized by the original debt agreement or that is otherwise permitted by law;
- Accept a check or other instrument postdated by more than five days, unless he or she notifies the consumer, in writing, of any intention to deposit the check or instrument; the notice must be made no more than ten nor less than three business days before the date of deposit;
- Solicit a postdated check to use as a threat or to institute criminal prosecution;
- Deposit or threaten to deposit a postdated check or other postdated payment instrument before the date on the check or instrument;
- Cause communication charges, such as charges for collect telephone calls and telegrams, to be made to any person by concealing the true purpose of the communication;
- Threaten to repossess or disable the consumer’s property when the creditor has no enforceable right to the property or does not intend to do so;
- Use a postcard to contact a consumer about a debt;
- Send an envelope to the consumer that contains language or symbols that indicates the communication concerns debt collection.
If a consumer owes several debts that are being collected by the same debt collector, payments must be applied in the order specified by the consumer. Further, no payment may be applied to a disputed debt.
A debt collector must provide the consumer with certain basic information within five days of the initial communication. The information required by the Section 1692g notice includes:
- The amount of the debt;
- The name of the creditor to whom the debt is owed;
- Notice that the consumer has thirty days to dispute the debt before it is assumed to be valid;
- Notice that upon such written dispute, the debt collector will send the consumer a verification of the debt or a copy of any judgment;
- If the original creditor is different from the current creditor, notice that if the consumer makes a written request for the name and address of the original creditor within the thirty-day period, the debt collector will provide that information.
If, within the thirty-day period, the consumer sends a written dispute or requests the name and address of the original creditor, the collector must stop all collection efforts until he or she mails the consumer a copy of a judgment or verification of the debt, or the name and address of the original creditor, as applicable. As a best practice, verification should include copies of the loan documents, the name and address of the original creditor, and an itemization of the debt balance.
As a best practice, the validation notices should be contained in the demand letter if one is sent. For purposes of the FDCPA, legal pleadings are not considered communications. If a law firm chooses to file suit without first sending a demand letter, the firm should be careful to ensure it sends a validation notice if the consumer calls after being served. If there is no communication until after a judgment is granted, then the judgment itself is verification. As a best practice, the firm should simply send the consumer a copy of the judgment with its first collection letter, along with the other required notices. This may seem redundant since all the validation and verification information would have already been provided in the lawsuit and exhibits, but it’s better to be safe than sorry when dealing with the FDCPA.
A debt collector may file a lawsuit to enforce a security interest in real property only in the judicial district in which the real property is located. Other legal actions may be brought only in the judicial district in which the consumer lives or in which the original loan contract was signed.
No one may design, compile, or furnish any form that creates the false impression that someone other than the creditor (for example, a debt collector) is participating in the collection of a debt.
Most states have passed laws similar to the FDCPA. The FDCPA preempts state law only to the extent that a state law is inconsistent with the FDCPA. A state law that is more protective of the consumer is not considered inconsistent with the FDCPA. Thus, the state versions only benefit consumers. Collection agencies and law firms should be careful before contacting debtors in other states. Most states require collection agencies to register as such. Law firms are usually exempt from the registration requirements but must be careful not to engage in the unauthorized practice of law in another state. In some states, simply sending a letter is considered the practice of law.