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By Michelle A. Dunn
Michelle Dunn's Credit and Collections Association LLC
Understanding and Following the Fair Debt Collection Practices Act
Agenda: I. What is the FDCPA & what debts are covered? A. Who has to follow the FDCPA? B. Who enforces the FDCPA? II. Understanding the FDCPA A. Mini-Miranda B. What hours can you contact consumers? C. What constitutes “harassment”? D. Dealing with Cease & Desist E. Dealing with calling a debtor at work F. Can you call a debtors spouse? Can you call them at work? G. Understanding “legal action” & “further action” H. Understanding what the FDCPA considers “unfair” I. Reporting the debt to the credit bureaus J. Skip tracing under the Act III. What constitutes a violation of the FDCPA? A. How to follow the FDCPA without getting into trouble B. Dealing with debtors who throw the FDCPA at you
As the economy falters and the credit crisis continues help keep your business out of a lawsuit by better understanding and learning more about the Fair Debt Collection Practices Act, who is affected, what debts are covered, who enforces it and how you can collect more money while following the law. Failing to properly train collectors is a top reason companies get sued. Don’t let this happen to you, learn as much as you can about what constitutes a violation of the FDCPA and how you can avoid making those mistakes.
The FDCPA is a federal statute and many states have collection laws that are very similar or the same. Keep in mind that this act was not written for debt collectors but for consumers in response to outrage by debtors about abusive collection actions during the 70’s. This act helps to provide a defense against third party debt collectors.
When you as a third party collector call a debtor your objective is to get the debtor to commit to payments on a past due bill. This act is here to provide protection to those debtors you call against abusive practices or practices a debt collector may take in order to obtain a payment. Unfortunately there are debt collectors out there who still harass and try to scare debtors into paying a bill, which is why we have reports such as this one. A tip to help you avoid having a debtor claim you were harassing them is to remember to NEVER engage in an argument with a debtor, if the call is going in the direction of an argument, end the call and call back at another time.
Some things to remember when collecting a debt that can protect you are: • Do not call before 8:00 am in the debtors time zone or after 9:00 pm in their time zone. • • Do not contact a debtor who is represented by an attorney. Don’t use letterhead that appears to come from an attorney or law firm, a government agency or courthouse. • Don’t use works that sound like a government agency in your name or in your correspondence, words such as “United”, “American”, or “Department”. For
things that may seem reasonable to you may not to them. flusters and agency. that is a name that is not registered with the state in which you are doing business. • Make sure your client or the original creditor gives you verification of the debt BEFORE you attempt to collect. • Don’t tell a debtor you will garnish their wages or take their car if you don’t have a judgment or don’t intend to sue to obtain a judgment. purchase order or application. a signed contract. I wouldn’t use this on my letterhead or in my letter: “From the offices of Dunn and Dunn. • Do not use post cards or anything on the outside of an envelope that would let anyone know you are a bill collector trying to collect a debt. embarrassed. You must be able to prove that the debt is owed. they may be uneducated. they may not understand.” This is my last name and could be the name of my agency but it gives the impression of a law firm. 3 . • Don’t use a fictitious name.example. Remember your audience. agreement.
the term debt collector under the FDCPA includes any original creditor who is trying to collect their own debt and is using a different name which indicates a third party is trying to collect. There are exceptions to this. only the collection of consumer debts are covered and regulated by the FDCPA. you may need to follow any state laws where you are located or where your debtor or customer is located. If you as the original creditor sell or assign the debt to another person to collect because the debtor is not paying you. however. internet. Business debts are NOT covered by the FDCPA.FAQ’s about the FDCPA Are all debts covered by the FDCPA? No. This can include lawyers. Who is a “debt collector” under the FDCPA? A debt collector under the FDCPA is any person who used mail. for example. 4 . landlords or home owner associations. a person who’s job is collecting past due debts. In other words. that person who you assign or sell the debt to is not the original creditor and is a debt collector under the act. or the telephone for the principal purpose of collecting a debt. If you are the original creditor you are NOT considered a debt collector under the FDCPA. This also includes anyone who regularly attempts to collect debts owed to someone other than themselves. law firms.
Question: Some debtors work at jobs where the phone calls are recorded. unless they tell you that it is inconvenient for them to receive the calls at work or if they tell you that their employer doesn’t allow them to receive debt collection or personal calls at work. if you are aware the call is being recorded.Can I call a debtor at work? Yes. This can be done verbally and does not need to be done in writing. 5 . or hear the beep indicating it is being recorded. You can discuss the debt only with the debtor or a co-singer who may be responsible for the debt. computer help lines or others. The following are questions most asked of attorney’s and consumer rights groups by consumers regarding the FDCPA: Question: Is it okay to leave the mini-miranda on voice mail? Answer: This would be a violation because you never know who has access to the voice mail. do you hang up or talk to them? It would seem that if you know this you are knowingly disclosing to a third party. Answer: A solution might be to advise the debtor that the call is personal and ask for an alternate or private number to contact them at. Can I ask a neighbor. spouse or parent to give the debtor a message? No. you cannot ask anyone to give the debtor a message about a debt. such as customer service.
If you have a debtor that always hangs up on you. Make sure you have a clear understanding of how the FDCPA treats each action. Some common complaints are: • • • Asking a consumer to pay more than they owe Asking a consumer to pay interest. don’t keep calling back on that same day or even the next day. only contact consumers during the times the FDCPA outlines and you will never have a problem. For Example. fees or expenses that are not allowed by law Calling repeatedly or continuously 6 .Common FDCPA Violations: • • • • • Contacting consumers at inconvenient times Making repetitive phone calls Harassment and verbal abuse Threatening to harm one’s person or reputation Contacting a consumer when the debt collector knows the consumer is represented by an attorney • Contacting a consumer if the debt collector knows the debt is disputed and the consumer has requested verification of the debt In view of these common FDCPA violations those are things you should pay particular attention to. If you know what the most common complaints are. Just use common sense and have a clear understanding of the FDCPA. you can make sure you are paying specific attention to those actions.
make sure any fees. profane or abusive language Calling before 8am and after 9pm in the debtors local time Calls at times the collector knew or should know are inconvenient Threatening action they cannot or will not take Illegally informing a third party about the alleged debt Repeatedly calling a third party to get location information Calls at work when the consumer cannot receive calls at work Calling before the consumer received requested validation of the debt Continuing to try and collect after receiving a cease & desist notification Some consumers might complain that you are trying to collect more than they owe. you might get a calmed down consumer or a machine. If there are other fees make sure you can validate them. If you call and have a hang up situation. Move on to your next account. wait 20 minutes and call back. so to avoid this. Be brief and move on. 7 . Do not keep calling and hanging up when the machine picks up or leaving long messages. interest or expenses that are added are allowed by law and that you are following any rules or laws that pertain to adding them. I have had new collectors ask me about calling repeatedly or continuously and asking just how many calls does that mean. always make sure the verification dollar amount matches the amount your client placed with you. Which brings us to our next item.• • • • • • • • • Using obscene.
If you don’t report the payment on that Friday as you said and the debtor finds out on Monday that you did not report it even though they did not pay.A debt collector once told me he called consumers before 8am because that is when they are at home getting ready to leave for the day. just never tell a debtor you will do something that you are not prepared to do. and why should they? 8 . this would mean. at dinner time or if you know they work 3rd shift and are sleeping during the day. if you don’t receive the payment. Be firm in what you say. This is easy to avoid a violation. Don’t do this unless the debtor has indicated that they give you permission to and event hen I would request that in writing. Much of the FDCPA is not clear. Threatening action you cannot or will not take is another one that is often brought up by debtors. when you say you will report the debt to the credit bureaus if you do not have their payment by Friday. In my opinion. such as not calling debtors at times you know or should know are inconvenient. For example. Otherwise stick to the guidelines of the FDCPA when making collection calls. you will gain credibility and get more payments. they will not believe you and will not pay. to call when you know they are sleeping. REPORT THE DEBT. next time when you say that again or say you will take them to court.
you can contact a third party to obtain location information but that is it. Don’t tell her. make sure they can receive calls at work so you don’t have a violation. well I am his mother and I handle his bills. what is this about. don’t do it. Once you send a debtor your initial collection letter that includes the mini-miranda. if the person who answers the phone is not the debtor. Don’t make the mistake of calling more than once for location information. Each time you are about to pick up the phone and call a debtor at work. if the debtor requests verification of the debt and you send it to them. You can call them at work. you should stop to avoid a violation or a complaint. No matter what they say. That 9 . AND you can only contact that third party for that information ONE TIME. When you are trying to locate a debtor. She is a third party. If you want to be sure they receive it and want to call when they receive it. illegally informing a third party about an alleged debt. this can cost you a violation.New collectors seem to run into the next problem the most. send it with a return receipt requested or have them sign for it. do not discuss the debt. DO NOT call until they have received that verification. but just be aware that if their employer or the debtor tells you that they cannot receive calls at work. Some people who answer the phone might say. Many debtors believe that a debt collector cannot call them at work under any circumstances but this is not the case. When you make a collection call.
way. Never ever call or contact a debtor if they send you a cease & desist letter. Then take that action. you must now collect without contacting the debtor. 10 . such as small claims court or civil court. you know they received if before you make the call. Contacting a debtor after receiving a cease & desist letter is a common complaint. and you can prove they received it before you called if there is ever a complaint. You can send one final letter or notice letting them know you received the cease & desist and what your next step or action will be.
is a United States statute added in 1978 as part of the Consumer Credit Protection Act. The Fair Debt Collection Practices Act (FDCPA). The FDCPA imposes restrictions on various practices for the collection of debts by an independent third party or a collection agency. to promote fair debt collection and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy. Its purposes are to eliminate abusive practices in the collection of consumer debts.What is the FDCPA? The Fair Debt Collection Practices Act seeks to eliminate debt collection abuse and helps good debt collectors while protecting consumers or debtors as well as creditors. Agencies are prohibited from contacting debtors at their place of employment if the agency is aware that the debtor’s employer disapproves of this action. Debt collection agencies are prohibited from certain harassing or abusive practices. The Act creates guidelines 11 . Debt collectors are allowed to contact a debtor: • • • • • In person By mail By telephone By telegram By fax Agencies are restricted from contacting debtors at inconvenient times or places.
in 2006 there were approximately 69. insurance. for medical care. or household purposes. property.under which debt collectors may conduct business. It is sometimes used in conjunction with the Fair Credit Reporting Act. Business debts are not regulated by the FDCPA. family.000 complaints against debt collectors and in 2007 there were 71. whether or not such obligation has been reduced to judgment. defines rights of consumers involved with debt collectors. and prescribes penalties and remedies for violations of the Act. According to the Federal Trade commission. 12 . or services which are the subject of the transaction are primarily for personal. or any charge account. What debts are covered? Consumer debts are regulated by the FDCPA. This can include purchases of an automobile. it only applies under certain circumstances: • • The debt must be a consumer debt The collector cannot be the original creditor.000. The FDCPA defines a consumer debt as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money. Although the FDCPA offers some protections.
" particularly after the October 13.some states. have been included (to the extent that they otherwise meet the definition) since 1986. directly or indirectly. The FDCPA itself contains numerous exceptions to the definition of a "debt collector. Thus. debts owed or due or asserted to be owed or due another. family or household transactions.Who has to follow the FDCPA? The FDCPA broadly 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. passage of the Financial Services Regulatory Relief Act of 2006. Original creditors do not have to follow the FDCPA but must follow state laws. The definitions and coverage have changed over time. or who regularly collects or attempts to collect. Attorneys. originally explicitly excepted from the definition of a debt collector. such as California. The FDCPA's definitions of "consumers" and "debt" specifically restricts the coverage of the act to personal. In addition. and regulate original creditors. 2006. 13 ." While the FDCPA generally only applies to third party debt collectors--not internal collectors for an "original creditor" -. courts have generally found debt buyers to be covered by the FDCPA even though they are collecting their own debts. have similar state consumer protection laws which mirror the FDCPA. debts owed by businesses (or by individuals for business purposes) are not subject to the FDCPA.
You could find yourself in financial trouble and you could be the debtor. statutory. Something to keep in mind when you are making collection calls or sending collection letters that will help you to do a better job and follow the law is to remember that in a moment. Annoyed consumers may also file a private lawsuit in a state or federal court to collect damages (actual. The collector may. How would you feel? How would you react to a bill collector? If you can put yourself in the position of the person on the receiving end of your correspondence or call that can help you be a better collector and collect more money.000 plus reasonable attorney fees if a debt collector is proven to have violated the FDCPA. Who enforces the FDCPA? The Federal Trade Commission has the authority to administratively enforce the FDCPA using its powers under the Federal Trade Commission Act." 14 . however.Something I feel is important to point out. the table could be turned. escape penalty if it shows that the violation (or violations) was the result of a "bona fide error. attorney's fee and court-costs) from third-party debt collectors. The FDCPA is a strict liability law. is that you are doing the right thing trying to learn more about the FDCPA and educating yourself. which means that a consumer need not prove actual damages in order to claim statutory damages of up to $1.
local time. What type of conduct is Prohibited? The Act prohibits certain types of "abusive and deceptive" conduct when attempting to collect debts. including the following: • Hours for phone contact: contacting consumers by telephone outside of the hours of 8:00 a.Alternately.1% complained that collectors failed to send the required consumer notice. The Mini-Miranda A collector must make the mini-miranda disclosure in their very first communication with the debtor. Under federal law. if the consumer loses the lawsuit and the court determines that the consumer filed the case in bad faith and for the purposes of harassment.m.m. and 3. In 2007 there were 2. to 9:00 p. 15 . Once you have disclosed the minimiranda in your initial communication you do not have to provide it with each communication though some states may require it. a collector must disclose that the communication is from a debt collector in all subsequent communications.6% of consumers that filed a complaint with the Federal Trade Commission for collectors failing to verify disputed debts. whether that is oral or written. the court may then award attorney's fees to the debt collector.
including advising that collection efforts are being terminated or that the collector intends to file a lawsuit or pursue other remedies where permitted • Contacting consumers at their place of employment after having been told verbally or in writing that this is not acceptable • • Contacting consumer known to be represented by an attorney Contacting consumer after request for validation: contacting the consumer or pursuing collection efforts by the debt collector after receipt of a consumer's written request for verification of a debt (or for the name and address of the original creditor on a debt) and before the debt collector mails the consumer the requested verification or original creditor's name and address • Misrepresentation or deceit: misrepresenting the debt or using deception to collect the debt.• Contact after being asked to stop: contacting consumers in any way (other than litigation) after receiving written notice that the consumer wishes no further contact or refuses to pay the alleged debt. which would include demanding any amounts not permitted under an applicable contract or as provided under applicable law • Threatening arrest or legal action that is either not permitted or not actually contemplated 16 . with certain exceptions. including a debt collector's misrepresentation that he or she is an attorney or law enforcement officer • • Publishing the consumer's name or address on a "bad debt" list Seeking unjustified amounts.
such as communicating with a consumer regarding a debt by post card. or using any language or symbol. other than the debt collector’s address.989) of FDCPA complaints were for: • • • • Obscene.• Abusive or profane language used in the course of communication related to the debt • Contact with third parties: revealing or discussing the nature of debts with third parties (other than the consumer's spouse or attorney) or threatening such action • Contact by embarrassing media. In 2007.592 consumers) 17 . Another frequent complaint is that the collectors harassed consumers by calling them repeatedly or continuously. on any envelope when communicating with a consumer by use of postal mail or by telegram. 19.402 complaints) Using or threatening violence if they did not pay (219 consumers) Falsely threatening legal action (4.7% (or 13. profane and/or abusive language Calling during off hours (1. except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business • Reporting false information on a consumer's credit report or threatening to do so in the process of collection According to the Federal Trade Commission the most frequent complaint against debt collectors is that they attempted to collect debts that consumers did not owe or a debt where the amount due had been inflated.
Some examples of harassment and abuse are: • • • • Threatening to use violence to collect the debt.• • • • • • Improper 3rd party contacts Failure to send written notice of a debt Failure to state who the debt is owed to Failure to provide instruction on disputing the debt & requesting verification Failure to verify debts Continuing to contact debtors after receiving cease & desist letters Some examples of things that collectors have done that are unfair practices according to the act: • • • • • • • Attempting to collect more money than was due under the contract. Calling endlessly and repeatedly. Making collect calls Using post cards in collection efforts Writing “Dead beat” on the outside of an envelope sent to the debtor. depositing or threatening to deposit a post dated check. Trying to collect on a debt that is past the statute of limitations. accepting. Using obscene. profane or abusive language or embarrassing the debtor. Asking for. Calling without identifying yourself. Threatening to or actually repossessing personal property of the debtor. 18 .
the collector must not communicate with that debtor in regards to that specific debt except: • • To advise the debtor that the collection efforts are being terminated. Contacting the customer after receiving a cease & desist letter. 19 . A collectors response to a cease & desist communication from a consumer cannot include a demand for payment. Discussing the debt with third parties. • To advise the debtor that the collector or the creditor does intend to use a specific remedy to get paid such as suing them in court or any other action available to them that they can legally take. To notify the debtor that the collector or the creditor may take advantage of specific remedies such as reporting the debt to a credit bureau or maybe pursuing the debt through the court system. or that they wish that the collector would cease further communication with them. Dealing with Cease & Desist If you receive a written or oral “cease & desist” from a debtor. Using letters that appear to look like legal documents.• • • • Calling a debtor when they know they are represented by an attorney. which includes that they refuse to pay the debt.
In 2007 there were 4. Calling a debtor at work The circumstances in which you may contact a debtor or consumer at work are: • • • • To obtain location information (as defined in 803(7). If you know the debtor cannot receive calls at work. for example: • • • • Factories Hospitals or doctor offices Schools Retail jobs 20 . Remember that the FDCPA prohibits calls made without prior permission to the debtors place of employment. With permission from a court in that jurisdiction.Debtors will sometimes send a cease & desist letter to stop a collector from calling.9% complaints of collectors continuing to contact a debtor after receiving a “Cease & desist” communication from them. Some work places do not allow any calls except for emergencies. When the debtor or consumer has given you permission to do so. If it is necessary to enforce a judgment. don’t call. they sometimes think that this will also make the debt go away and that they won’t have to pay at all.
you would not use this as a tool to help you to be paid.Last year. Also. or the consumers attorney. 4. You cannot disclose the existence of the debt to the employer since this would violate the FDCPA. Can you call a debtors spouse? Yes. Understanding “legal action” & “further action” Collectors should only tell consumers that they will take further action or legal action if they intend to take that action OR if you as the debt collector has reason to believe that a 21 . A collector may only discuss the debt with the consumer. their attorney. a consumer reporting agency. according to the FDCPA the term consumer includes the consumers spouse or if the debtor is a minor the term consumer includes their parent or guardian. the attorney of the creditor.162 consumers complained about collectors calling them at work. The law instructs collectors not to call consumers at work if the consumer has stated their employer prohibits such contacts and such contacts may put the employee’s job at risk. you may call a debtor’s spouse at their place of employment. so check the laws in the state you are collecting in and in your state. and since you cannot threaten any action that cannot legally be taken. you cannot threaten to contact their employer if you don’t intend to take that action. Some state laws may prohibit this. Can you call a debtors spouse at work? Yes. the creditor.
• • Soliciting a post dated check with the intent of criminal prosecution. Collectors should be aware that they should never say or imply that payment in full of the debt will prevent further action.third party (which might be your client) will take such action. unless you notify the writer of the check your intent to deposit the check not more than 10 or less than 3 business days prior to your depositing the check. The terms “further action” and “legal action” should both be used with the same caution. What does the FDCPA consider “unfair”? “Unfair” is not specifically defined by the FDCPA. For example. 22 . since that may not be the case. The debtor can request you to cease & desist at any time. Some examples of “unfair” could be: • Indicating that you are a debt collector or work for a collection agency on the outside of an envelope or anything mailed to the debtor. The FDCPA does state that “unfair” practices are banned. some courts have found that saying “nonpayment may result in further action” implies to a consumer or debtor who is not familiar with the law or the terms. • • • Communicating by postcard Collecting more than the amount that is legally due. Accepting a post dated check. that non-payment will result in legal action being taken. Depositing or threatening to deposit a post dated check before the date indicated on the check.
m. and ruined credit ratings when they had no intention of taking those actions. Reporting debts to the credit bureaus If you have an account with the credit bureau or bureaus. Skip tracing under the act In the FDCPA the term “location information” means a consumer’s place of employment. you may tell a debtor that nonpayment will affect their credit record if you intend to report the debt. local time unless you have special permission. where they reside and their telephone number at their residence. wage garnishment.m. that must be reported as well. It DOES NOT include 23 . prosecution. Utah and Illinois state law requires you notify the debtor before reporting negative information to their credit report. In 2007 6. Making contact before 8 a. Causing injury to a debtor. If the debtor disputes any portion of the debt. such as lawsuits. and after 9 p. California. Making contact when you know it is inconvenient to the debtor.• • • • • Placing collect phone calls to the debtor Sending telegrams “collect” to the debtor. job loss.5% of consumers complained to the Federal Trade Commission that collectors had threatened dire consequences.
Threatening legal action when you cannot or have no intention of pursuing legal action would be a violation. Do not call to verify the information. For example. letters. giving the impression that nonpayment will result in arrest when an arrest in those circumstances would be illegal. the names of supervisors or their telephone numbers salaries or pay dates. What constitutes a violation under the FDCPA? A violation of the FDCPA could be making false or misleading representations in communications with the consumer or debtor. stating or sending a letter to the debtor saying that if 24 . Do not ask the neighbor to give the debtor a message and check your specific state laws to make sure this is allowed. For example. Another violation would be to give a false impression as to the amount of the debt or the legal status of that debt. voice messages.work phone numbers. You can contact a debtors neighbors to ask for a phone number or address for the debtor only if you do not have that information. the communications would be phone calls. a credit reporting agency or are affiliated with the federal or a state government. Another violation could be giving the false impression that you as the collector are an attorney. Giving the false impression that you as the collector are going to pursue some type of action that is illegal would be a violation.
The case was tried over 10 days in September 2007. that the communication is from a debt collector. Something to remember is that if a collector uses any false. in every communication. this law firm was sued for charging unauthorized fees. or misleading representation in regards to debt collection that I have not mentioned here. interest. interest. BUT you never file a lawsuit and never intended to. BE CAREFUL! As an example take a look at a Law Associates company. Tips for following the FDCPA and staying out of trouble. in Pennsylvania. the FDCPA will most likely still offer the consumer protection from it. The FDCPA requires debt collectors to: • Identify themselves and notify the consumer. and that information received will be used to effect collection of the debt 25 . penalties and attorney fees that the courts had forbidden. penalties or attorney fees to a delinquent tax bill. In a detailed court order the court found that the Law Associates had “refused to obey the law” by continuing to charge and collect fees. Another violation would be giving the false impression to the debtor that they have committed a crime by not paying their debt.payment is not received within 7 days a law suit will be filed.. deceptive.
complicating the matter where the debt collector is an attorney or law firm. • Provide verification of the debt If a consumer sends a written dispute or request for verification within 30 days of receiving the validation notice. Such asserted disputes must also be reported by the creditor to any credit bureau that reports the debt. with the debt collector. Consumers may still dispute a debt verbally or after the thirty-day period has elapsed. • Notify the consumer of their right to dispute the debt. if at all. only in a place where the consumer lives or signed the contract 26 . then the debt collector must either mail the consumer the requested validation information or cease collection efforts altogether. Verification should include at a minimum the amount owed and the name and address of the original creditor. but doing so waives the right to compel the debt collector to produce verification of the debt. in part or in full. though in 2006 the definition of "initial communication" was amended to exclude "a formal pleading in a civil action" for purposes of triggering the validation notice. • File a lawsuit in a proper venue .• Give the name and address of the original creditor (company to which the debt was originally payable) upon the consumer's written request made within 30 days of receipt of the validation notice. The consumer's receipt of this notice starts the clock running on the 30-day right to demand validation of the debt from the debt collector.a debt collector may file a lawsuit. This so-called 30-day validation notice is required to be sent by debt collectors within five days of the initial communication with the consumer.
The Washington. or after 9 p. According to the inflation calculator at the Bureau of Labor Statistics' website.C.m. • Offer training and education for collectors and anyone dealing with debtors. D. This should not be understood to be an exhaustive list either of prohibited or required conduct. Dealing with debtors who throw the FDCPA at you. Have a compliance plan and a compliant officer or someone who oversees your plan.• Check time zones before placing calls to debtors. Its member attorneys bring thousands of such FDCPA suits each year in virtually all 50 states 27 . Consumer groups have complained that the maximum statutory damages contained in the original 1977 version of the law has not kept up with inflation. Do not call before 8 a. that same penalty would be the equivalent of $3. • • Have written policies in place. in their time zone. and does not provide sufficient deterrence against unscrupulous collection agencies.105.83 by 2006 standards.-based National Association of Consumer Advocates is the largest consumer advocacy organization in the United States.m. Some consumer groups argue that the FDCPA does not go far enough.
Many debt collectors.rather than simply pay what she owes – visit’s her lawyer's office to vindicate a perceived "wrong. There were approximately 69. upon receiving a debt collection letter that contains some minute variation from the statute's requirements.249 complaints in 2006 and 70. 28 .951 complaints in 2007. and the consumer rights attorneys who sue them for violations of the FDCPA rely heavily on the definitive legal treatise on the FDCPA produced by the National Consumer Law Center. Given the strict liability nature of the FDCPA. at times. She eventually receives a collection letter requesting payment of the debt which she rightfully owes. Her debt remains unpaid and undisputed. the collections industry and the insurance companies who provide liability coverage for them have repeatedly lobbied Congress to relax provisions of the law to reduce their civil exposure for these "hypertechnical" violations. seriously impeded their ability to collect valid debts.4% in 2007." According to the Federal Trade Commission FDCPA Complaints rose 2. A scenario created by the FDCPA as follows: The hypothetical Consumer makes a $500 purchase. The consumer. many in the credit industry and some courts have taken the stance that the FDCPA has often been used to file frivolous lawsuits and seek damages for minor technical violations and has. Conversely. immediately exclaims "This clearly is a violation of the FDCPA!" and -.
If you don’t feel confident that you can have an answer ready for anything a debtor may say to you when you make a collection call. If the debtor knows the law better than you do. It is my opinion that a collector won’t be set up for a violation if they follow the FDCPA. 29 . The only way to have a debtor complain about a FDCPA violation is if you are not familiar with the laws and what you can or cannot do. This is not only to protect yourself and the debtor but the company you work for. If you are not familiar with the FDCPA you have no business calling a debtor and trying to collect in the first place. if a debtor is asking you questions about the debt then that means the debtor knows his or her rights under the FDCPA and if you violate those rights you are setting yourself or your business up for suit. you set yourself up by not educating yourself on the laws you must follow. Education is a huge factor in the debt and credit industry. you need to educate yourself more until you do feel confident. There are not any warning signs that you are being set up by a debtor. you need to hang up and learn the laws before trying to collect.There has been a lot of talk lately by collectors and by debtors on ways to “set up” a collector for a FDCPA violation in order to avoid paying a debt. there is so much to know and you have to be educated in order to be prepared or ready for every situation. A debtor cannot “set you up” for any violation.
If you know the laws in your state and the FDCPA you will be able to respond to these statements and continue to try and collect. haven’t you heard of the FDCPA?” “That was a medical bill so it can’t be reported to the credit bureaus. so I guess you don’t get paid.” As a collector you know that these are stall tactics a debtor might use to try to get out of paying a debt that they legally owe.” “That is my wife’s bill and this isn’t a community property state. In some cases if you give a debtor any chance or reason they will take that opportunity to sue you and try not to pay their legal obligation. The debtor says these things hoping it will be enough to make you go away and allow them to get out of paying a bill they legally owe.” “That is my husbands’ bill and he isn’t working. Some debtors just flat out refuse to pay their debts and do not care what the consequences are.” “I will pay in full only if you show me a signature on a bill.For example some things a debtor may say to try and throw you off guard are: “It is illegal to call me at work. so I am not paying.” “Are you going to sue me?” “Are you an attorney?” “What’s going to happen if I don’t pay this?” “I have no idea what this bill is. 30 . You also know how to respond to each of these statements if you are familiar with the FDCPA and if you have some experience making collection calls and/or dealing with debtors.
Some collectors will cease trying to collect on an account if the debtor cites a FDCPA violation even if there is no basis. which sometimes results in no payment. Don’t be misled by someone who doesn’t have a clue or is ignorant of the law. All collectors need to continuously stay updated on the laws and training available to them. They feel that this is not worth the time and effort to continue to try and collect from this debtor. Collectors should join associations and network with other collectors. The most frequent and common complaints presented to the FTC against collectors according to the May issue of Collections & Credit risk in 2006 were: 31 . attend conferences. I have run across many debtors who think they know the FDCPA and will try to sue you for things that are not violations. Some agencies will pass the account over to a lawyer or paralegal when a debtor starts claiming a violation. If you know the FDCPA as well as the debtor you will be able to respond while following the law and therefore not giving the debtor anything to sue you for. There is much more training available now than when I started my agency. It is your job to be prepared and educated not the debtors. This is just a long and expensive stall tactic. ask someone.You can avoid this by knowing the FDCPA inside and out and being prepared for anything a debtor says to you. read trade journals and books and if you are not sure about something.
543 in 2003 according to ACA International. 32 . 21.5% in 2005 Failing to send the required notice of a debt.7 in 2005 • • Harassing a debtor.4% compared to 9.3% in 2005 Revealing a debt to a third party.3% compared with 42. up from 4. 8.9%. 2.587 complaints in 2004 and 34. 3. There were 58.5% unchanged from 2005 The FTC received 69. 3. Threatening dire consequences for a failure to pay. down from 6.2% of all 2006 complaints.6% in 2005 • • • • Calling a place of employment.3% down from 4.85%.8% more than the 66.• Demanding a larger payment than allowed by law. according to the commission’s annual report to Congress on the act.7% in 2005 Failing to verify a disputed debt. 4.204 complaints last year that were related to the FDCPA.672 received in 2005. 5. 40.
592 4.8 3.3 4. Complaint type Demanding larger payments than permitted by law Calling repeatedly Repeatedly calling neighbors.6 19.536 6.466 2.Top Complaints against Debt Collectors in 2007 Source: U.848 1.393 13.9 3.182 1. fees & expenses that were not owed % of complaints 38.1 2.672 2.2 9.5 5.989 13. relatives or co-workers to find the debtor Use of obscene. profane or abusive language Falsely threatening to file suit or take actions they do not intend to take Improperly calling debtors jobs Ignoring written notices to cease communication Telling others about alleged debts Failure to provide notice of debts Falsely threatening to arrest debtors or seize property Failure to verify disputed debts Demanding interest.876 1.7 # of consumers 27.6 2.361 6.2 9.6 2. Federal Trade commission Note: Percentages do not add up to 100 because consumers may have filed complaints about multiple violations.9 4.637 33 .S.162 3.
Collectors cannot harass.0 0. Collectors cannot swear or use abusive language. Collectors cannot threaten a debtor with arrest. Collectors cannot threaten legal action if they don’t intend to legally take it. Collectors cannot threaten violence.3 1. 34 .Calling before 8 am or after 9 pm Using or threatening to use violence 2. repossession. Collectors cannot call a debtor repeatedly. Collectors cannot call a debtor at work if the employer prohibits it. Collectors cannot put “collection language” on the outside of an envelope. Collectors cannot use false or misleading representations. Collectors cannot claim they are affiliated with a government agency. Collectors cannot call a debtor before 8 a. in their time zone. Collectors can only contact a third party once in an effort to locate a debtor.m. prison. Collectors cannot “publish” names of debtors. Collectors cannot communicate with a debtor who has an attorney. Collectors cannot claim they are attorneys.402 219 The FDCPA – What you Can’t Do! • • • • • • • • • • • • • • • • • • • Collectors cannot talk about debts to third parties. or after 9 p. oppress or abuse a debtor.m. Collectors cannot use postcards. or attachment if they don’t’ intend to take those actions and state law permits it. Collectors cannot misrepresent the amount or legal status of the debt. Collectors cannot call a debtor and then not identify themselves.
Be clear on the state laws where you are collecting and where you are located. To be able to claim this you should reduce your risk with these tips: • • Training. Reducing Your Risk There is a “good faith” defense in any FDCPA suit. Keep accurate and detailed records in case you need to produce them in court. • • • • • • Monitor your employees. 35 . Read and re-read the act and have copies for all your collectors. Collectors cannot use fake company names.• • • • Collectors cannot falsely tell a debtor that they have committed a crime. Retain a FDCPA attorney in your area. Collectors cannot make false reports to the credit reports of debtors. Collectors cannot use any false or deceptive actions in the collection of debts. test them periodically Fire employees who don’t comply with the FDCPA. there is never to much training Making collectors aware that their actions or inactions could create financial headaches personally and for the business owner.
Examples of FDCPA Violations • Failure to inform a debtor that the communication is from a debt collector and that any information obtained will be used to collect a debt. 36 . Leaving detailed messages about a debt on any voice mail or answering machine or with anyone other than the debtor. court official or police officer. • Misrepresenting the amount of debt owed. Yelling or screaming at a debtor even if they are yelling at you. Calling a debtor after receiving a cease & desist notification. Falsely claiming you will ruin a debtors credit. Discussing the debt with an employer or supervisor of the debtor. • • • • • • • • • Calling a debtor before 8am or after 9pm in their time zone. Calling a debtor names. • Failure to inform on subsequent communications that those communications are from a debt collector. wage garnishment or jail. Falsely threatening a lawsuit. Making religious or racial slurs. Threatening any action you don’t intend to or cannot take such as criminal charges. • • • Pretending you are a lawyer. prosecution. Using obscene or profane language with a debtor.
encyclopediaofcredit. H-130 Washington. Being unfair or deceptive.• Continuing to try to collect a debt that has been paid.com Can you spot the FDCPA violations in their sample letters? 37 . NW. • • Not providing verification of the debt when requested. Resources & Notes Federal Trade Commission 600 Pennsylvania.ftc.Credit-and-Collections.gov Michelle Dunn’s Credit & Collections Association www. settled or discharged through bankruptcy. DC 20580 (877) 382-4357 www.com The Encyclopedia of Credit www.
00 and the legal fees are the biggest expense. award winning author.000.com & www. Michelle Dunn is the founder of her 10 year old Credit & Collections Association.000. Debtors do not need a legitimate cause to file a suit.00$10. “ A 20 year Debt collection industry veteran.Credit-andCollections.WebRecon LLC – Mitigating the risk of FDCPA lawsuits for the collection industry “There are well over 400 FDCPA cases being filed each month in this country. I know from personal experience that these cases can easily cost over $5. The pace of suits has more than doubled in just the last 4 years. entrepreneur.” “It is important to remember that there are potential FDCPA issues no matter what you do.MichelleDunn. the author of 7 books and a regular contributor to the Wall Street Journal. and that number is steadily growing.com 38 . one of the Top 5 Women in Collections for 2007 & 2008 and one of the Top 50 most influential collection professionals of 2007. Learn more at www.
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