We have received many questions concerning debt collectors and what they can and can’t do. The following information is found in the Fair Debt Collection Practices Act. In addition, several states have their own version of Debt Collection Practices. Whether involved in commercial or consumer credit, the credit professional should be familiar with the Act and especially the state act where there customers reside since many states Fair Debt Collection Practices apply to both commercial and consumer collectors.

The limitations on debt collection are primarily found in the Federal Fair Debt Collections Practices Act.  The statutory provisions included in the act place restrictions on debt collectors in connection with consumer debt. A consumer is defined as any natural person obligated or allegedly obligated to pay any debt. The term debt means any obligation or alleged obligation of a consumer to pay money arising out of a transaction where the money, property, insurance or services are primarily for personal, family or household purposes. Although definitions, under the Federal Act, have not changed many states have adopted the Federal Act and amended it to include commercial transactions. Therefore, one should always look to the state where the debtor resides to determine what is covered under that states’ act. Where a state does not have its’ own act the Federal Act applies.

Often time debt collectors go beyond the provisions of the act and make threats that re either false or intimidating. Debt collectors may not:

Use the threat of violence or criminal means to harm the person, reputation or property of any person;

Use obscene or profane language;

Publish a list of persons who refuse to pay debts except to a credit-reporting agency;

Advertise the sale of any debt for the purpose of coercing payment of the debt;

Make repeated telephone calls or conversations with intent to annoy, abuse or harass any person at the called number;

Prohibited from using false, deceptive or misleading statements in an effort to collect debt including:

Represent that the collector is affiliated with any State government or Federal agency unless they are;

Any false statement concerning the character, amount or legal status of the debt;

Any false statement that the debt collector is an attorney or legal representative;

Any claim that non-payment of the debt will result in arrest or imprisonment;

Any claim that non-payment of the debt will result in seizure, garnishment or attachment

of wages,  or sale of property unless such action is lawful and the creditor tends to take such action;

Threaten to take any action that cannot legally be taken or is not actually intended;

Falsely claiming that the sale or any other transfer of the debt has or will result in the loss of any claim or defense to payment by the debtor;

False representation that the debtor committed a crime or other conduct to disgrace the debtor;

Communicating or threatening to communicate information that is known or should be known to false;

Use of any written communication that falsely represents to be a document authorized or approved by a court of law or government agency.

The Act limits the information that can be provided to third parties and the manner that debt collectors can communicate. When a debt collector is attempting to contact or locate the debtor and makes contact with anyone other than the debtor, the collector is required to:

Identify him or herself and, if requested, identify their employer;

Not reveal the debtor owes any money;

Not communicate with any third party more than once unless requested to do so by the third party or unless the debt collector reasonably believes the earlier response was incomplete or erroneous;

Not use postcards to communicate;

Not use any language or symbol on any envelope or in the contents of any communication that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of debt;

Only communicate with the debtors’ attorney if the collector knows the debtor is represented by an attorney or discovers an attorney represents the debtor, unless the attorney fails to respond within a reasonable time.

The Act also limits communication with the debtor. Unless the debtor gives authorization to the debt collector or the debt collector obtains express permission from the courts, a debt collector may not communicate with the debtor in connection with any debt:

At any unusual time or place or a time or place that is known or should be known to be inconvenient. The debt collector must assume that the convenient for communication is after 8am and before 9pm local time;

The debt collector may not communicate at the debtors’ place of employment if the debt collector knows, has reason to know or has been told that the employer prohibits the debtor from receiving such communication;

The debt collector may not communicate the debt with any third party other than the debtors’ attorney, a consumer-reporting agency permitted by law, the creditor and the creditors’ attorney without prior permission of the debtor or authorization from the court.

If the debtor notifies a debt collector, in writing, that the debtor refuses to pay a debt or that the debtor wants the debt collector to cease further communication with the debtor, the debt collector shall not communicate further with the debtor concerning the debt. For purposes of this limitation, the debtor includes the debtors’ spouse, parent (if the debtor is a minor or incapacitated), guardian, executor or administrator.

There are other limitations concerning written communication by debt collectors. Within five days after initial contact, the debt collector must send the debtor a written notice containing the amount of the debt, the name of the creditor, and a statement that unless the debtor disputes the validity of the debt within 30 days, the debt will be assumed valid, a statement the debt collector will obtain verification of the debt and send it to the debtor and a statement that if the debtor requests in writing within 30 days the debt collector will provide the debtor with the name and address of the original creditor if different from the current creditor.

Upon written notification by the debtor to the debt collector that the debt is disputed, the debt collector must suspend the collection of the debt, or any disputed portion of the debt, until the debt collector obtains written verification of the debt from the creditor or the name and address of the original creditor and a copy of the verification or name and address of the original creditor is provided to the debtor.

If a debt collector violates the statute, the debt collector is liable for actual damages plus up to $1,000 in additional damages. This is under the Federal Act. Certain states may impose greater amounts in additional damages.

When first adopted, attorneys were exempt from provisions of the Act. Amendments to the Act now include all attorneys engaged for the purpose of collecting from the debtor. However, an occasional incidental effort to collect a debt on behalf of a client does not make an attorney a debt collector.

The act can be use to stop harassment and even end collection all together. The act is designed to protect both the creditor and the debtor against abusive debt collectors and, in some cases, attorneys who are unfamiliar with the act.

I wish you well.  

The information provided above is for educational purposes only and not provided as legal advice. Legal advice should be obtained from a licensed attorney in good standing with the Bar Association and preferably Board Certified in either Creditor Rights or Bankruptcy.