Collections Law

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Table of Contents

The Risky Business of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Fundamentals of Debt Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Fair Debt Collection Practices Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Distinction Between Debtor and Creditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Clear Credit Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Types of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Past Due Correspondence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Prohibited Practices Under the FDCPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Debt Collection Mini-Miranda Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Bankruptcy and Debt Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Who Engages in Debt Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Commercial Creditor Debt Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Business Debt Collections Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Small Claims Court and Collections Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
How to Choose a Collection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Sample Letter from Legal Counsel/Debt Collection Rep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Additional Credit Related Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

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 The Risky Business of Credit

Extending credit to customers can be risky. How will you know if a customer is a good credit risk? How can you tell if
extending credit will actually increase your bottom line? By extending credit to customers, it gives them the option to
purchase products or services today and pay for them at a later date.

Pros of Offering or Extending Credit

• Increases customer goodwill and builds good customer relations;
• Makes customers less sensitive to price and more focused on the services you offer.
• Encourages customers to spend more, which can result in increased sales if receivables are turned to cash

Over 80% of consumer spending in the U.S. is cashless or credit based

When a Business Extends Credit to a Customer, the Business Makes Four Basic Assumptions:
1. The customer has every intention of paying;
2. That the customer is able to pay;
3. That nothing will happen to prevent payment;
4. That the businesses judgment about the character and integrity of the customer is accurate

Most customers pay on a timely basis but the difference between a successful business and a failed business
sometimes depends on the ability of a customer to pay either on time or ever.

There are numerous benefits to extending credits to customers. However, there are some risks to extending credit
that all businesses should be aware of.

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 The Risky Business of Credit
Cons of Extending Credit to Customers
Late paying customers
Most customers who buy on credit will be great customers who pay you on time; but there could be a few bad eggs
that bring trouble in the form of late or delinquent payments.

The effect on cash flow

Without extending credit, your income every month is what it is. When you start offering credit, your cash flow will
be somewhat disrupted. Many companies do not pay until Net 30 or 60 (30 or 60 days after the invoice). Others fall
further behind. All of that affects cash flow

Increased Focus on Accounts Receivable Management

When a business extends credit, they have to make accounts receivable management a priority. A/R management is
much more than simply sending invoices and recording payment, it takes a lot of time and energy to do it right and
avoid bad-debt write offs, invoice disputes, and late payments. There are plenty of tactics, tools, and simple process
adjustments you can implement to help you quickly collect invoices without hiring any additional hands or letting
money slip through the cracks.

You will have to collect

Credit means invoicing every month, and invoicing means collecting.

Collection Fees
If you have to turn an invoice over to a collection agency or get a lawyer involved due to lack of payment, you won’t
collect everything you are owed. This combats the purpose of extending credit in the first place, but it’s only a real
problem if numerous invoices end up requiring a collection agency or legal action.

Extended credit for the consumer today is often expanded debt for collections tomorrow

Understanding and Complying with the Laws Associated with Extending Credit and Collecting on Debt and
Delinquent Accounts
If your business extends credit to customers, you should become aware of consumer credit laws. The Federal Trade
Commission (FTC) enforces the nation’s consumer protection laws. These laws regulate how you advertise interest
rates, how much time you have to respond to billing-mistake claims, how aggressive you can be when attempting to
collect a debt, and other aspects of extending credit and debt collections.

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 The Fundamentals of Debt Collection

Debt collection and collections-related law and activity arise from a person or company’s failure to make payment on
an obligation to a lender, credit provider, or a seller of goods or services. Debt collection always involves and concerns
the seller or lender (creditor) seeking to recover a sum of money from another person or company (debtor).

Debt collection falls into one of two basic categories:

1. Consumer

2. Commercial

Consumer Debt and Commercial Debt – What’s the Difference?

Consumer Debt
Consumer debt is always incurred by an individual. It includes debt created by credit cards, medical bills, car loans,
secured and unsecured personal loans – debts arising in the course of daily living. Consumer debt arises when credit
is extended, or a buy now and pay later sale is made, to an individual for personal, family or household purposes.

Commercial/Business Debt
By contrast, any debt incurred between businesses, even if the buyer is a sole proprietorship or partnership, is a
commercial transaction only. This is commercial debt, also referred to as business debt, meaning a debt owed by
a business. It can also be secured or unsecured, but follows slightly different guidelines. Most businesses have to
borrow money in order to create working capital. Secured debt is usually backed by a building or major pieces of
equipment, while unsecured debt usually comes from the owner’s credit cards, or from business loans made by banks
or private lenders.

Consumer debt collection is governed by far stricter laws and regulations than commercial debts. The protection
afforded to a consumer debtor is substantially more than the protection given to a commercial debtor. The biggest
difference between consumer and commercial debt collection: the FDCPA.

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 The Fair Debt Collection Practices Act
The FDCPA or Fair Debt Collection Practices Act governs the processes and mechanisms that can be used in
consumer debt collection and is administered by the Federal Trade Commission (FTC) and the Consumer Financial
Protection Bureau (CFPB).

Background
Congress enacted the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 in 1978. Its purpose is to eliminate
abusive, deceptive, and unfair debt collection practices of third-party debt collectors.
To that end, the FDCPA establishes guidelines for the conduct of debt collectors, defines the rights of consumers,
and prescribes penalties for violations. It also encourages consistent state action to protect consumers from abuses in
debt collection.

State and Federal Regulation of Debt and Credit

The FDCPA is a federal law. Both federal and state governments control and regulate the credit industry.
Consumer – any natural person obligated or allegedly obligated to pay a debt. 15 U.S.C. § 1692a(3)
Debt – any obligation or alleged obligation of a consumer to pay money for goods or services. 15 U.S.C. § 1692a(5)
“Consumers” and “Debt” covered under the FDCPA are defined as specifically referring to personal, family, or
household transactions
Creditor – 15 U.S.C. § 1692(4) defines “creditor” as “any person who offers or extends credit creating a debt or to
whom a debt is owed.” The definition includes the party that actually extended credit or became the obligee on an
account in the normal course of business.
Credit – is the trust which allows one party to provide money or resources to another party where the second party
does not reimburse the first party immediately (thereby generating a debt), but instead promises to repay or return
the resources at a later date. The resources provided may be financial (e.g. granting a loan), or they may consist of
goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment.

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 Distinction between Debtor and Creditor

A debtor is a person, entity or enterprise that owes money to another party. Debtors are typically customers who
have taken possession of goods or services from a business but have not yet paid the business for those goods and
services. (The party to whom the money is owed is often a supplier or bank that will be referred to as the creditor.)

A creditor is a person, bank, company or other enterprise that has lent money or extended credit to another party.
(The party to whom the credit has been granted is often a customer that will now be referred to as a debtor.)
Creditors are typically suppliers that extended, or delivered goods or services to the business but the business has
not yet paid the supplier for those goods and services.

If Company X borrowed money from a bank, Company X is the debtor and the bank is the creditor. If Supplier A sold
merchandise to Retailer B, then Supplier A is the creditor and Retailer B is the debtor.

Knowing and using the two terms correctly is a fundamental key aspect of collections law and accounts receivable
matters.

Debtor vs. Creditor Comparison Chart

Comparative Term Debtor Creditor

Debtors are the

The bank or enterprise
individuals or
that lends money
Meaning businesses who owe
or extends debt to
money to another
another party
company

An account
What is it? An account payable
receivable

Discount Allowed to debtors Given by creditors

Term 'debere' of Term 'creditum' of Latin

Derived from Latin language which language which means
means 'to owe' 'to loan'

Provision for Not created on

Created on debtors
Doubtful Debts creditors

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 Distinction between Debtor and Creditor

The Difference Between a Debt Collector and an Original Creditor

Many people do not realize the difference between an original creditor and a debt collector. Because of this,
misconceptions about the rules of how each can collect on a debt exist. To gain an understanding of these
differences, it is important to first identify what both are, and how they collect on outstanding debts.
The main difference between a third-party debt collector and an original creditor is that the original creditor is the
entity that actually offers or extends the credit in the first place, whereas the debt collector is an outside third party
hired by the creditor. The creditor gives the money or the credit; the debt collector tries to recover it back on behalf
of the original creditor.

What is a Debt Collector?

A “Debt Collector” is any person who uses any instrumentality of interstate commerce (phone, mail, email) in any
business, the principal purpose of which is collection of any debt asserted to be owed or due another. 15 U.S.C. §
1692a(6).
In other words, “debt collectors” are defined as third parties collecting for a creditor. The FDCPA places numerous
restrictions on what debt collectors are allowed to do when collecting debts and provides consumers with certain
rights and remedies against those who violate any of its provisions.

The Term Debt Collector Does Not Include:

For the purpose of section 1692f (6) the term (debt collector) 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;

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 Distinction between Debtor and Creditor

The FDCPA, Debt Collectors and Original Creditors – What applies and What Doesn’t?
The Fair Debt Creditor’s Protection Act (FDCPA) applies only to debt collectors, it does not apply to original creditors!
Original creditors are representatives of the company a consumer contracted with for the loan, such as an auto loan
company or credit card company. A representative from the collections department of a VISA account is not covered
by the FDCPA.

Under federal law the FDCPA does not apply to original creditors.

The FDCPA Does Apply to Third Party Debt Collectors Which Include the Following:
• Collection Agencies
• Debt buyers, debt purchasers, and zombie creditors
• Law firms that engage in high-volume debt collection work – meaning that they’re rubber stamping debt
collection lawsuits
• Anyone “pretending” to be employed by a collection agency
• Skip-tracers (individuals trying to locate a debtor’s contact information or information about a debtor’s assets)
Anyone else trying to collect on a consumer’s credit card account, other than the true credit card employees, is
included as a debt collector.
Several states including California have enacted state laws which regulate the actions and practices of both debt
collectors and original creditors.

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 Distinction between Debtor and Creditor
Exceptions to the FDCPA’s Definition of Debt Collector
For purposes of the FDCPA, a person attempting to collect a debt for someone else is not considered a debt collector
under the following circumstances.

Business debts. The FDCPA only applies to consumer debts incurred for personal or household expenses. It does not
apply to corporate or business debts.

Debts not in default when purchased. If the original creditor sold the debt to a third party when it was not yet in
default, then the entity purchasing it is not subject to the FDCPA as a debt collector.

Government employees when collecting debt in their official capacity. Federal or state employees are exempt from
the FDCPA when collecting debts as part of their official duties.

Legal process servers. Process servers are exempt from the FDCPA when serving legal process as part of judicial
proceedings to enforce a debt.

Persons not regularly engaged in the business of collecting debts. If a person or entity does not regularly collect
debts on behalf of others, it may not be considered a debt collector under the FDCPA.

When collecting debts on behalf of a related entity. If a person or entity is attempting to collect a debt on behalf of
another company under the same ownership or corporate control, it will not be considered a debt collector as long
as that person’s principal business is not debt collection.

Nonprofit organizations performing credit counseling and debt liquidation services at the consumer’s request.
If a consumer requests credit counseling from, or sends payments to a nonprofit organization that distributes the
payments to his or her creditors, that organization is not considered a debt.

Debts originated by the debt collector. If a creditor originated the debt but later sold it to a third party, the original
creditor is still not considered a debt collector when collecting that debt on behalf of the new entity that owns it.

Debts obtained as security in a commercial credit transaction with the original creditor. If the person or entity
obtained the debt as a security interest in a commercial credit transaction with the original creditor, it is not
considered a debt collector.

FDCPA does not apply to commercial debt collections.

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 Distinction between Debtor and Creditor
Unlike consumer debt, commercial debt is used to fund business expenses, asset acquisition and improvements. It is
common for businesses to accumulate a great deal of commercial debt when first starting out.

Consumer Debt or Commercial Debt: You Decide

Jane and Barbara are business partners who just opened “Great News PR Services,” a marketing and public relations
firm. A few months prior to opening their business, Jane entered into several contractual credit agreements where
she promised to pay for goods and services totaling close to $75,000 that she felt were needed to open the business.
Jane is now several months behind in payments on the accounts she opened, and creditors are sending late payment
notices to the Great News PR firm threatening further collection action if payment is not received. Barbara feels Jane
alone owes on the outstanding debt, and not the PR firm.

Are the accounts Jane opened that are now past due, consumer debt owed by Jane as an individual, or commercial
debt owed by the business?

If the creditors take legal action, who should/can they sue for nonpayment, Jane or Great News PR Services?

As it relates to the FDCPA, what’s the significance of whether Jane, individually, or Great News PR Services owes the debts?

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 Clear Credit Policies
Best Collections Start with Clear Credit Policies

Essential Elements of Effective Credit Policies

• Statement of standard terms of payment (e.g., net 30 days)
• Statement of consequences of nonpayment
• Statement from debtor acknowledging responsibility
• to pay debt
• to pay attorney’s fees
• Statement of acceptable payment methods
• Statement of interest charged, including:
• Exact amount owed
• Current interest rate
• Annual percentage rate
• Number of payments and total finance charges

Note: Must be written to conform with the latest Federal Reserve Guidelines!

• Process for disputing charges/credit:

• Products received
• Services performed

Full determination guidelines for potential debtor credit-worthiness, including:

• Credit in good standing
• Ability to repay
• Stability
• Collateral
• Good character

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 Types of Credit
Non-Revolving Credit
Non-revolving lines of credit are also known as installment agreements. This type of account requires a consumer
to pay a fixed monthly amount (or more), until the principal is paid off in full at which point the account is closed.
Mortgage, auto, and student loans are examples of non-revolving credit lines.

Revolving Credit
Monthly payments on revolving lines of credit, such as credit and department store cards, which fluctuate based on
how much credit a consumer has used and how much the consumer chooses to pay off each month.

Single Payment Credit

When the customer receives services now, and then pays for the services later with a single payment after a certain
amount of specified time.

Secured Credit
Secured credit refers to loans secured by an asset, such as a home or car. This type of credit is considered a safer
risk on behalf of lenders. Reason being: if a consumer defaults on their auto loan, the lender has the legal right to
repossess the car.

Unsecured Credit
Unsecured credit, in contrast, does not involve putting down collateral to obtain financial resources. This type of debt
typically refers to credit and retail cards.

Debt Consolidation
If a consumer is having difficulty paying off their current loans, the consumer may be able to consolidate the debt
with a new lender who will put the consumer on a single, reduced-interest payment plan. The new lender will
effectively buy all of the consumer’s debt. Because the new lender can repay the debt, they may be able to negotiate
discounts from the consumer’s current lenders to make a profit. Although, the lender may also extend the time the
consumer has to pay off the loan, ultimately leaving the consumer with more interest to pay in the long term.

Lease-Purchase
Often associated with buying a new car, when a consumer enters into a lease-purchase, they are partly buying the
product and partly renting it. At the end of the lease term, the consumer may be faced with paying more money to
buy the car outright, or walking away.

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 Types of Credit
Sample Credit Agreement
This credit agreement is made on this ______ day of _________________, 20______ by and among,

First Party: ________________________________________________________________ (Hereinafter known as “Borrower”)

and
Second Party: ________________________________________________________________ (Hereinafter known as “Lender”)

Borrower and Lender shall collectively be known herein as “the Parties”. In determining the rights and duties of the
Parties under the Credit Agreement, the entire document must be read as a whole.

Credit Terms
Loan Payment Terms: Borrower to pay $200 to Lender every month for the life of the loan. First payment shall be
due 30 days from the date of execution of this agreement and continue each month on the monthly anniversary
thereafter until the Loan Balance, including principal and accrued interest, is paid in full. In cases where a payment
due date is the 29th, 30th, and 31st of a month and said month contains a shorter number of days, the due date shall
be the last date of the month.

IN WITNESS WHEREOF and acknowledging acceptance and agreement of the foregoing, the Parties affix their
signatures hereto.

Borrower Lender

Name: _________________ _______________________________________ Name: _________________ _______________________________________
(signature)
(signature)

Date: __________________________, 20xx Date: __________________________, 20xx

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 Contracts
Let’s Discuss Contracts
Business contracts are one of the most common legal transactions involved in running a business and managing
and collecting on outstanding accounts. Having an understanding of contract law is key to creating sound business
agreements that will be legally enforceable in the event that a dispute arises.

“Contract” Defined
A contract is a legally enforceable agreement between two or more parties that creates an obligation to do, or not
do, particular things. The term “party” can mean an individual person, company, or corporation. At its most basic level,
a contract is: 1) An agreement, and 2) Legally enforceable.

Laws that Govern Contracts

Contracts are usually governed and enforced by the laws in the state where the agreement was made. Depending
upon the subject matter of the agreement (i.e. sale of goods, property lease), a contract may be governed by one of
two types of state law:
Common Law. The majority of contracts (i.e. employment agreements, leases, general business agreements) are
controlled by the state’s common law — a tradition-based, but constantly evolving set of laws that is mostly judge-
made, from court decisions over the years.
The Uniform Commercial Code (UCC). The common law does not control contracts that are primarily for the sale
of goods. Contracts for the sale of goods are controlled by the Uniform Commercial Code (UCC), a standardized
collection of guidelines that govern the law of commercial transactions.

Creation of a Contract
In the eyes of the law, a contract arises when there is an offer, acceptance of that offer, and sufficient “consideration”
to make the contract valid:
• An offer allows the person or business to whom the offer is made to reasonably expect that the offering party is
willing to be bound by the offer on the terms proposed. The terms of an offer must be definite and certain.
• An acceptance is a clear expression of the accepting party’s agreement to the terms of the offer.
• Consideration is a legal term given to the bargained-for exchange between the parties to the contract —
­­
something of some value passing from one party to the other. Each party to the contract will gain some benefit
from the agreement, and will incur some obligation in exchange for that benefit.

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 Contracts
Types of Contracts
The law recognizes contracts that arise in a number of different ways:
A bilateral contract is the type of agreement most people think of as a traditional contract -- a mutual exchange of
promises among the parties. In a bilateral contract, each party may be considered as both making a promise, and
being the beneficiary of a promise.
A unilateral contract is one in which the offer requests performance rather than a promise from the person
accepting the offer. A unilateral contract is formed when the requested act is complete. A classic example of a
unilateral contract is a “reward” advertisement, offering payment of money in exchange for information or the return
of something of value.
An express contract is formed by explicit written or spoken language, expressing the agreement and its terms.
An implied contract is formed by behavior of the parties that clearly shows an intent to enter into an agreement,
even if no obvious offer and/or acceptance were clearly expressed in words or writing.

Failure to Perform Under the Contract: “Breach”

When disputes arise over contracts, one party may accuse another of failing to perform under the terms of the
agreement. Under the law, a party’s failure to fulfill an end of the bargain under a contract is known as “breaching” the
contract. When a breach of contract happens (or when a breach is alleged), one or both of the parties may wish to
have the contract “enforced” on its terms, or may try to recover from any financial harm caused by the alleged breach.

Enforcing Contracts Under the Law

If a dispute over a contract arises and informal attempts at resolution fail, the most common method used to resolve
contract disputes and enforce contracts is through lawsuits and the court system. If the amount at issue is below a
certain dollar figure (usually $3,000 to $7,500 depending on the state), the parties may be able to use “small claims”
court to resolve the issue.

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 Past Due Correspondence
Initial Collection/Past Due Letter
Date
Dear _______________________________________________:

This letter is a friendly reminder that payment on your account in the amount of $____________ was due on
____________ . If you have already sent us your payment, kindly disregard this letter. If not, please send us your
payment promptly.

Sincerely,

Follow Up Collection/Past Due Letter

Date
Dear _______________________________________________:

This is our second reminder that payment on your account in the amount of $____________ was due on
____________ . We value your business and hope to keep you as a customer. However, we do require payment
according to the terms of our invoices. Please send us your payment promptly.

Sincerely,

Final Demand Collection/Past Due Letter

Date
Dear _______________________________________________:
This is our final reminder that payment on your account in the amount of $____________ was due on ____________
. If we do not receive payment in full by ______________________ , we will submit your account for collection or
legal counsel for further action.

Sincerely,

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 Prohibited Practices
What Types of Debt Collection Practices Are Prohibited Pursuant to the FDCPA?

Harassment: Debt collectors may not harass, oppress, or abuse any person.
For example, debt collectors may not:
• Use threats of violence or harm against the person, property, or reputation
• Publish a list of consumers who refuse to pay their debts
• Use obscene or profane language
• Repeatedly use the telephone to annoy someone
• Call a debtor/consumer before 8 a.m. or after 9 p.m. the local time of the consumer
• Telephone people without identifying themselves
• Advertise a consumer’s debt

False statements: Debt collectors may not use any false statements when collecting a debt.
For example, debt collectors may not:
• Falsely imply that they are attorneys or government representatives
• Falsely imply that the consumer has committed a crime
• Falsely represent that they operate or work for a credit bureau
• Misrepresent the amount of a consumer’s debt
• Misrepresent the involvement of an attorney in collecting a debt
• Indicate that papers being sent to a consumer are legal forms when they are not

Debt collectors also may not state that:

• The debtor will be arrested if they do not pay the debt
• They will seize, garnish, attach, or sell the debtor’s property or wages, unless the collection agency or creditor
intends to do so, and it is legal to do so
• Actions, such as a lawsuit, will be taken against the debtor, which legally may not be taken, or which they do not
intend to take

Debt collectors may not:

• Send the debtor anything that looks like an official document from a court or government agency when it is not
• Use a false name
• Force the debtor to send a postdated check
• Contact the debtor by postcard

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 Prohibited Practices
Debt collector calls debtor at his place of employment but is informed by person answering the call that debtor is
busy. May the debt collector call back? What if the debt collector is informed that the debtor is not allowed personal
calls at work, may the debtor call back?

Original creditor calls debtor’s cell phone at 6 am because creditor knows that the debtor works from 11 p.m. – 7 a.m.,
is this ok under federal law? Why/why not?

Debt collection agency sends letter to debtor. The envelope bears the symbol of a bald eagle with its wings
outstretched and the sender is listed as “National Collection Bureau” and the return address is 123 “H” Street,
Washington D.C., 01234-5678. Violation? Why/why not?

Debt collector tells debtor that debt collector will have debtor and his family locked up and deported. Debtor is a U.S.
citizen. Violation? Why/why not?

Debt collection agency sends letter to debtor. On the back of the letter is printed the “mini-Miranda” warning.
Nothing on the front indicates that the recipient should turn the letter over for review. Violation? Why/why not?
What is the mini-Miranda?

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 Debt Collection Mini-Miranda Disclosure

Debt Collector Communication Requirements Under the FDCPA

Mini-Miranda Disclosure:
Initial Communication: Section 807(11) of the Fair Debt Collection Practices (FDCPA) requires a debt collector to inform
a consumer in the initial communication with the consumer that “This communication is from a debt collector. This is
an attempt to collect a debt and any information obtained will be used for that purpose.” This disclosure is commonly
known as the Mini-Miranda.
In the event that a debt collector’s first communication with a consumer is oral, the full Mini-Miranda disclosure must
be provided in the oral communication as well as included in the first written communication sent to the consumer.
The disclosure is required even when it is the consumer who initiates the communication. The Mini-Miranda
disclosure, whether in the initial or subsequent communications with a consumer, must be made “clearly.”

15 U.S. Code § 1692g - Validation of debts

(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.
• Debt collector calls debtor regarding debts that have been discharged in bankruptcy. Violation? Why/why not?
• Can an original creditor or a debt collector attempt to collect on a debt that was discharged in bankruptcy?

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 Bankruptcy and Debt Collections
Bankruptcy Key Terms, Definitions and Explanations
Bankruptcy
A federally authorized procedure by which a debtor is declaring an inability to pay creditors and is relieved of total
liability for its debts by making court approved arrangements for repayment. Bankruptcy laws are broken down into
chapters.

Chapter 7 Bankruptcy
Type of personal bankruptcy sometimes referred to as “liquidation” bankruptcy where a bankruptcy trustee can
liquidate (convert to cash) any non-exempt assets to help pay off debts.

Chapter 9 Bankruptcy
This bankruptcy chapter focuses on bankruptcies of municipalities, such as cities and towns.

Chapter 11 Bankruptcy
This bankruptcy chapter focuses on reorganization proceeding for businesses.

Chapter 13 Bankruptcy
A type of personal bankruptcy sometimes referred to as a “reorganization of debts.” Debtors work with the
bankruptcy court to develop a three to five year repayment plan to eliminate their obligations to creditors.

Bankruptcy Petition
The legal forms that must be filed at court for a bankruptcy case to officially begin.

Bankruptcy Trustee
An individual appointed by the U.S. Department of Justice or by the creditors in a bankruptcy case to oversee the
proceedings of the bankruptcy case.

Discharge
The elimination of debt and exit of bankruptcy proceedings.

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 Who Engages in Debt Collection?
• A variety of entities, including originating creditors, third-party collectors, debt buyers, and collection attorneys,
engage in debt collection.

• Originating creditors may attempt to obtain payment from the consumer, typically by sending letters and making
telephone calls to convince the consumer to pay.

• Originating creditors also may outsource the collection of debt to third-party collection agencies or attorneys, or
sell the debt to debt buyers after an account has been delinquent for a period of time.

• Third-party collection agencies collect debt on behalf of originating creditors or other debt owners, often on a
contingency fee basis.

• Debt buyers purchase debt, either from the originating creditor or from another debt buyer, usually for a fraction
of the balance owed. Debt buyers sometimes use third-party collection agencies or collection attorneys to collect
their debt, but many also undertake their own collection efforts. Debt buyers also may decide to sell purchased
debt to another debt buyer.

What about Commercial Creditors and Debt Collection?

If the FDCPA does not apply to commercial debt collection by third parties, how are commercial collectors
regulated?
Although the FDCPA does not apply to commercial debt collectors, this is not to say, however, that the activities of
commercial debt collection agents are not subject to regulation. The Commercial Collection Agency Association
(CCAA) is responsible for supervising the activities of commercial debt collectors.

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 Commercial Creditor Debt Collections
Commercial Collection Agency Association
The premier body governing the activities of commercial debt collectors is the Commercial Collection Agency
Association (CCAA), an arm of the Commercial Law League of America (CLLA). These organizations are not
government bodies, nor do they have any jurisdiction over non-members.

However, both require high standards of practice and ethics in order for a commercial collection agency to become a
certified member .

About the CCAA

The Commercial Collection Agency Association was established in 1972 to “improve the quality and reputation of the
commercial collection industry.” It currently has more than 200 members (of the several thousands doing commercial
debt collection); approximately 100 core members represent the most prestigious commercial collection agencies in
the United States.
The CCAA is an arm of the Commercial Law League of America (CLLA), the oldest creditor’s rights organization in the
country established in 1895.

Membership in the CCAA

Members of the CCAA are the only collection agencies in the United States certified by the Commercial Law League
of America. In order to obtain certification, the agency must meet rigorous criteria.

Certification Requirements:
• The agency must have been in business at least four years prior to application for membership.
• 80% of the agency’s business must be commercial (business-to-business).
• The agency must maintain a separate Trust Account into which all monies belonging to creditors are placed. This
Trust Account is reviewed twice annually by the Executive Director of the CCAA.
• The agency must agree to abide by the CCAA Code of Ethics, which sets ethical standards for dealing with
creditors, debtors, and attorneys.
• Executives of the agency must meet continuing educational requirements and attend regular CCAA meetings.
The member agency must complete sixty continuing educational credits annually.
• The agency must post a surety bond of at least $300,000 for the protection of the creditors it serves.
• One person in the agency must also be a member of the Commercial Law League of America.
• The agency must agree to random periodic site visits from the CCAA Executive Director.
• The agency must be in compliance with all local and state licensing requirements and regulations governing
commercial collection firms.

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 Commercial Creditor Debt Collections

Commercial Collector Training

In addition to certifying and monitoring member agencies, the CCAA offers professional certifications to individual
commercial debt collectors. To achieve certification as a Senior Certified Collection Professional, collectors are
expected to complete a comprehensive course of study and to demonstrate their knowledge and expertise by
passing a rigorous examination.

So, who’s minding commercial debt collectors?

Primarily, the Commercial Law League of America and its Commercial Collection Agency Association have assumed
responsibility for looking after the needs and rights of creditors and their customers/debtors. State governments that
require licensing and bonding of commercial debt collectors also play an important role.

However, since membership in the CCAA is not compulsory, and some firms may provide collection services in a
state but never get licensed, it is up to creditors themselves to ensure that they (and their debtors) are receiving the
most ethical and highest level of commercial collection service. How? By checking that their chosen agency is both a
member of the Commercial Collection Agency Association and therefore certified by the Commercial Law League of
America, and is licensed in the U.S. states requiring such licensing – this is creditor due diligence.

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 Business Debt Collection Best Practices Steps
1. Develop a payment policy. Before you provide any services or goods, contract with your customer so they
understand what they are responsible for paying and when. Make sure all document language is clear. Discuss
the account with the customer so you can be sure they are familiar with any charged amounts and due dates.
Payment terms need to be agreed on by both parties.
• Consider adopting a late payment fee to encourage on-time payments. You may choose to charge a
percentage of the total bill when payments become delinquent—2% is typical. Make sure all late fee policies
are included in your contract or payment policy.
• You may prefer to ask for at least 50% of payment upfront. This ensures you at least receive something in
exchange for your time and efforts.

2. List the due date on every bill you send. Some invoices state, “payment due upon receipt.” You may also use “net
15 days,” “net 30 days” or any other period of time in which you expect someone to remit payment.
• Placing a due date on a bill encourages your customer to include it in a current or upcoming billing cycle. If
you do not place a due date on the bill, the business may wait a month or two before paying.
• Don’t wait 30 days from the date of service or delivery of the product to send out a bill. Bill every 15 to 30 days.
The sooner you send out the bill, the more likely you will get paid sooner.

3. Send reminder bills. When a payment becomes past due, immediately send a reminder invoice or letter noting
the amount owed as well as the fact that payment is now past due. Many customers are so busy that they simply
forget a bill hasn’t been paid. They will often pay it as soon as they realize payment is past due.
• Keep a record of all contact with the debtor. You will need the dates and times of your calls, letters and any
other communication about the late payment, in case of legal action. You may also need to address this
information when you contact the debtor.

4. Keep in contact with each company or customer. Make sure you have relevant contact information, such as
address, telephone number, and extension if available. It is also good to check in with your business contacts
regularly. Engaged business relationships promote a mutual desire to fulfill transactions.
• Address each bill directly to the person who makes financial decisions in a business or the person responsible
for the account.

5. Create a procedure for dealing with debts. You will need to decide what happens when payments are late.
Generally, you first send out a reminder, then call the customer or business that is late with a payment, follow up,
try to negotiate and then take it to collections or pursue legal action if the debt remains unpaid.

6. Understand your debtor. Try to figure out why the payment is late. Most debtors fall into 1 of 3 categories:
1. either they want to pay but can’t do it on time because of difficulties with finances, 2. they habitually delay
payments as long as possible due to priorities for the month, or 3. they have decided not to pay you at all.
• When you speak to the person or department that owes you money, try to uncover what type of debtor they
are. Once you understand if non-payment has to do with finances, priorities or actual avoidance, you can
come up with a solution for both parties that is, hopefully, mutually beneficial.
• Know that a business with financial trouble may not want to discuss their possible failure.

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 Business Debt Collection Best Practices Steps
7. Call the debtor about the account. The first step after mailing a bill and reminder is to contact them by phone.
Identify yourself and your reason for calling.
• Do not harass the debtor, just be straight-forward. Always use a civil tone and try to convey a desire to keep a
positive relationship. You can address consequences further down the line.
• Ask the person how they are and if they received your invoice. To discuss the late payment, try: “I am
concerned because your payment is now (insert how many days) late. What can I do to help you make this
payment and minimize consequences, such as (insert consequence)?” You can also ask if there is a reason they
want to discuss on why the payment has been late.
• Try to get a verbal agreement that the invoice will be paid and when.
• Follow up the conversation in a week by phone, email or mail.
• Never apologize for asking about a debt that is owed to you. Remember that the money rightfully belongs to you.

Additional Collections Steps

1. Call back in 15 to 30 days.
•
•

2. Discontinue all services or goods that the debtor receives.

•
•

3. Write demand letters.

•
•

4. Negotiate with the debtor.

•
•

5. Send a “pre-collect notice” to the debtor.

•
•

6. Choose the next step debt collection route.

•
•

7. Pursue Legal Action.

•
•

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 Small Claims Court for Debt Collection Disputes

Every state and the District of Columbia have a system of small claims courts that can be utilized to collect judgments
for smaller amounts of money and resolve disputes. Small claims court can be particularly cost effective for collecting
unpaid debt because it may eliminate the substantial fees charged by an attorney. In fact, small claims court works so
well that in many courts over 60% of the cases heard are filed by businesses both large and small.

What Types of Claims are Usually Filed?

Business owners can normally file two types of lawsuits in small claims court. You can file a suit in an attempt to
collect outstanding accounts receivable from customers, or you can settle other disputes with customers, suppliers,
or vendors.

Is Filing a Lawsuit in Small Claims Court Complicated?

In the majority of states, the paperwork consists of a one-page form. It usually asks for the filers’ name, address and
phone number and the name and address of the person or business being sued. If there are questions ask to speak to
the court clerk who may assist in filling out the form.

How Much Does it Cost to Sue in Small Claims Court?

Fees vary from state to state.

Are There Time Limits on When a Lawsuit Can be Filed?

All states have “statutes of limitations” which limit the time for filing suit these rules apply in small claims court as well.
Check with the appropriate state where the lawsuit is to be filed to determine the statute of limitations.

If The Creditor Wins, How Do They Obtain the Judgment Money?

Judgment allows the victor to either garnish or execute on property of the person or business that has the judgment
against them. The court, however, will assist in identifying assets to be garnished or taken possession of. This is done
through a debtor’s examination conducted through the court. This can be done immediately after judgment is
rendered or at a later date. Once assets have been identified such as debtors’ employment or bank accounts a writ
of garnishment can be applied for through the court. A writ of execution empowers the sheriff to take possession of
assets of the debtor. The creditor must provide a description of the property and its location. Some sheriff’s require
that a bond be posted before they will take possession of a judgment debtor’s property. The clerk of the court will be
able to provide garnishment or execution forms along with information about fees or bond postings.

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 Small Claims Court for Debt Collection Disputes
Small Claims Court Dollar Limits by State
State $ Limit State $ Limit State $ Limit
Alabama $6,000 Louisiana $5,000; (city court); $5,000 (justice Oklahoma $10,000
of the peace, but no limit on
eviction cases)
Alaska $10,000 Maine $6,000 Oregon $10,000
Arizona $3,500 Maryland $5,000 Pennsylvania $12,000
Arkansas $5,000 Massachusetts $7,000; no limit for property Rhode Island $2,500
damage caused by a motor vehicle.
California $10,000, except that a plaintiff may not Michigan $6,500 South Carolina $7,500
file a claim over $2,500 more than twice a
year. Limit for a local public entity or for
businesses is $5,000. $6,500 is the limit in
suits by an individual against a guarantor
that charges for its guarantor or surety
services.
Colorado $7,500 Minnesota $15,000; ($4,000 for claims Tennessee $25,000; no limit in eviction
involving consumer credit suits or suits to recover personal
transactions, $15,000 for claims property
involving money or personal
property subject to criminal
forfeiture)
Connecticut $5,000 (except in landlord-tenant security Mississippi $3,500 Texas $10,000
deposit claims).
D.C. $10,000 Missouri $5,000 Utah $11,000
Delaware $15,000 Montana $7,000 Vermont $5,000
Florida $5,000 Nebraska $3,600; from July 1, 2015 through Virginia $5,000
June 30, 2020 (adjusted every five
years based on the Consumer Price
Index)
Georgia $15,000 (no limit in eviction cases) Nevada $10,000 Washington $10,000 if brought by natural
person; $5,000 all other cases
Hawaii $5,000; no limit on landlord-tenant New $10,000 West Virginia $10,000
residential security deposit cases. For the Hampshire
return of leased or rented personal property,
the property must not be worth more than
$5,000.
Idaho $5,000 New Jersey $3,000; ($5,000 for claims relating Wisconsin $10,000; no limit in eviction
to security deposits); certain suits
landlord-tenant suits cannot be
brought)
Illinois $10,000 New Mexico $10,000 Wyoming $6,000
Indiana $6,000; ($8,000 in Marion County) New York $5,000; ($3,000 in town and village
courts)
Iowa $5,000 North Carolina $10,000
Kansas $4,000 North Dakota $15,000
Kentucky $2,500 Ohio $6,000

https://www.nolo.com/legal-encyclopedia/small-claims-suits-how-much-30031.html

updated January, 2020

Check your state’s website for any special rules or exclusions.

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 How to Choose a Collection Agency
Business or Customer Won’t Pay? How to Choose a Collection Agency
Collection agencies specialize in recovering debts that are past due — typically by 90 days or more. They rely on
various forms of communication to reach customers and persuade them to pay, including phone calls, letters and
emails. In some cases, they turn to the legal system to collect if other efforts are unsuccessful. Every year, collection
agencies return nearly $50 billion to the U.S. economy.

Good collection agencies understand which tactics and strategies are most effective. They have tools and
technologies to help them locate people who have moved or changed phone numbers. Beyond just basic collection
efforts, some agencies also provide billing services such as processing, coding, printing and mailing. Some also
provide telemarketing, accounting, or business administration services.

While there are many reputable collection agencies, there is a reason the industry on the whole has earned
something of a bad rap. Some agencies rely on unscrupulous, harassing or illegal tactics to collect, and that’s
something to avoid at all cost because it reflects poorly on your business. There are strict laws surrounding collections
efforts, and any reputable agency will follow them.

If you’ve decided to hire a collection agency, it is important to do your research first to understand what separates the
good ones from the bad. It is also important to find a collection agency that is experienced, professional and familiar
with your industry. Not every collection agency will be a good fit.

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 Sample Attorney/Debt Collection Representative Letter

Date

VIA CERTIFIED MAIL

RETURN RECEIPT REQUESTED

[Debtor’s Name]
[Debtor’s Address]

Re: [Creditor]; Our File No. _______________

Dear [Debtor]:

[Creditor] has retained us to assist them in collecting your past due account as referenced above. My client’s records
indicate that your outstanding balance as of _________________, 20____ is $9,257.84 as shown by the enclosed invoice.
My client is appreciative of your business, but we point out that your account has been past due for an extended
period of time and we now ask that you clear it up. If we do not receive payment in full of this account in cash or
certified funds on or before 5:00 p.m. on _____________, 20____, we will commence such action as is necessary to protect
[Creditor’s] legal rights.

You should be aware that this is an action to collect a debt, and any information you provide to us can be used for
that purpose. All portions of this claim shall be assumed valid unless disputed within 30 days after receipt of this
notice. If notified, we will obtain verification of the debt and mail a copy to you. This letter is a communication from a
debt collector.

We are certain you wish to avoid the expense and burden of litigation, and we ask that you give this matter your
prompt attention.

Sincerely,

Attorney at Law

Encl.

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 Additional Credit Laws
Consumer Credit Laws
These laws arise under both state and federal regulations governing interest, finance charges, cash advances, charges
for extensions of credit in excess of pre-established limits, late fees or delinquency charges, premiums on credit
life, annual fees and other charges and fees. If a business grants credit to customers, it must comply with federal
laws affecting credit sales to consumers, as well as state laws in whichever jurisdiction it is operating. In addition
to the FDCPA, federal credit laws also include the Truth in Lending Act (TILA), the Fair Credit Billing Act (FCBA), the
Equal Credit Opportunity Act, Consumer Credit Protections Act, the Fair Credit Reporting Act (FCRA), and the Credit
Practices Rule.

The Truth in Lending Act

This Act helps customers know what they are agreeing to in a credit transaction. It requires businesses to disclose
their exact credit terms and regulates how credit providers can advertise. Required disclosures include monthly
finance charges, annual interest rates, payment due dates, total sale prices, and how late charges are assessed and
how much they are.

The Fair Credit Billing Act

This federal law governs billing errors on credit accounts. The customer must notify the credit provider within 60 days
of an incorrect charge, and the credit company must respond within 30 days. The creditor must conduct a reasonable
investigation and, within 90 days of getting the customer’s letter, explain why the bill is accurate or correct the error.
Failure of a creditor to comply will result in a $50 credit toward the disputed amount, even if the bill was correct, and
the creditor cannot report the disputed amount to credit agencies until the disagreement is resolved.

The Equal Credit Opportunity Act

Credit companies may not discriminate against an applicant on the basis of race, color, religion, national origin, age,
sex, or marital status. The only justifiable basis for declining to extend credit are things like the applicant’s financial
status (earnings and savings) and credit record. Although there is a prohibition against age discrimination, a credit
company can reject a consumer who is underage.

Consumer Credit Protection Act

Federal legislation that created disclosure requirements which must be followed by consumer lenders such as banks,
credit card companies, and auto-leasing firms.

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 Additional Credit Laws
The Fair Credit Reporting Act
This is the federal law primarily related to credit reporting agencies. It protects consumers from having their eligibility
for credit disrupted as a result of incomplete or misleading information contained in one’s credit report. The law gives
consumers the right to receive a copy of their credit reports and challenge inaccurate information contained in it. If the
business reporting inaccurate information does not change or delete the inaccurate information after being alerted to
the inaccuracy, the consumer can add a 100-word statement to the file explaining his or her side of the story.

The Electronic Funds Transfers Act

A federal law that protects consumers engaged in the transfer of funds through electronic methods. This includes the
use of debit cards, automated teller machines and automatic withdrawals from a bank account. The act also provides
a means of correcting transaction errors and limits the liability from any losses due to a lost or stolen card.

The Credit Practices Rule

The Credit Practices Rule applies to consumer credit contracts offered by finance companies and retailers for any
personal purpose except to buy real estate. It prohibits creditors from including certain provisions (such as wage
assignments and waivers of exemption) in consumer credit contracts, and requires a written notice to consumers
before they cosign obligations for others.

State Laws
Many states have their own debt collection related laws as well. Some of these laws mirror the FDCPA. However, some
offer more protection to consumers by, for example, covering restrictions for creditors as well as collectors, specifying
additional types of behavior that violate state law, or providing for additional types of damages.

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 Appendix
Wrap Up and Going Forward
Key Concepts of Understanding
• Develop and Communicate Clear Credit Policies

• Understand the Difference between an Original Creditor and a Debt Collector

• Develop Contracts with Clearly Written Terms and Agreements

• Understand the FDCPA and Applicably Related State Laws

• Ensure that Communication and Written Correspondence is Timely and Detail Specific

• Identify the Difference Between Consumer Debt and Commercial Debt

• Maintain Ongoing Best Practices Strategies in the Collection Process

• Small Claims Court and Further Legal Action

Next Step Strategic Plans of Action

©Pryor Learning Solutions • WLQ2003ES-DL 31

 Appendix
Overcome Reasons for Nonpayment
Reasons for Nonpayment
“The Check is in the Mail.”
“I don’t have the money.”
The boss is out of town and can’t
sign the check for two weeks.”
“Our bookkeeper quit.”/ “We’re
still waiting for approval.”
“I have a gripe with the product
service.”
32
Response
Find out exactly when the check was mailed.
Ask for the check number, amount and bank it was drawn on.
Verify address.
Offer to send a messenger to pick up the check or offer to pay for express mail charges.
Find out exactly why. Ask, “Are you filing for bankruptcy or going out of business?”
Ask about the nature of their other outstanding debts and what amounts they’re
paying toward those.
Suggest a weekly or monthly payment program.
Accept post-dated checks.
Ask if they can borrow the money or have other sources of funds.
Suggest financial counseling.
Ask if anyone else is authorized to sign checks or if the check needs more than one
signature. If so, find out if the other person has signed it.
In the meantime, confirm that the check has been processed and is awaiting signature.
Create a sense of urgency by calling a few days before the boss is expected back to
verify his or her return
Find out who is replacing him or her or when they expect to fill the position.
If you get vague answers, contact the president or head of the organization directly.
Send copies of unpaid invoices with any pertinent information to the new person and
offer to assist in any way.
Ask the exact nature of their complaint.
Ask if they have spoken to anyone previously about this
complaint and what, if anything, has been done about it – be sure to get names and
dates if possible.
Find out if the complaint relates to a portion of the total bill and ask for payment on
the part that is not in dispute.
©Pryor Learning Solutions • WLQ2003ES-DL
 Appendix
The Fair Debt Collection Practices Act
15 USC 1692
§802 Congressional findings and declaration of purpose
(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.
(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.
• Authority through US Constitution Commercial Clause
• Applies to all states
(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.
• Specifically disallows certain conduct
• Provides debtor a civil clause of action
• Courts apply on case-by-case basis

§ 1692a. Definitions
(1) The term “Commission” means the Federal Trade Commission
• Agency that enforces act
• Issues “Informal Staff Letters”
(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.

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 Appendix
The Fair Debt Collection Practices Act
(5) T he 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) T he 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 (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 affiliate and if the principal business of such person is not the collection of debts;
(C) a ny 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) a ny 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;
(F) a ny 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) c oncerns a debt obtained by such person as a secured party in a commercial credit transaction involving the
creditor.
(7) T he term “location information” means a consumer’s place of abode and his telephone number at such place or his
place of employment.

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§ 1692b. Acquisition of location information
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) n
 ot 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) n
 ot 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 debt a; and
(6) a fter 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.

§ 1692c. Communication in connection with debt collection

(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) a t 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) a t 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.

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 Appendix
(b) Communication with third parties
Except as provided in section 1692b 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
post judgment 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) w
 here applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
(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.

§ 1692d. Harassment or abuse

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) T he 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) T he 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 (f) or 1681b (3) of this title.
(4) The advertisement for sale of any debt to coerce payment of the debt.
(5) C
 ausing 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) E xcept as provided in section 1692b of this title, the placement of telephone calls without meaningful disclosure of
the caller’s identity.

§ 1692e. False or misleading representations

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the
collection of any debt

§ 1692f. Unfair practices

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt

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