FDCPA Essentials for Collectors
©2011 ACA International. All Rights Reserved. 1
Table of ContentsTable of Contents
Introduction and Background . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 3
Appropriate Third-Party Contacts . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 4
By Relationship . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 6
By Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 6
By Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Avoiding False and Misleading Statements . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 13
Avoiding Unfair Practices . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 15
Responding to Disputes . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 18
Cease Communication Requests . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 20
Creditor Complaints . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 22
©2011 ACA International. All Rights Reserved.2
Table of Contents
Class Actions. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 23
Individual Liability . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 24
Appendix A: Fair Debt Collection Practices Act [15 U .S .C . § 1692
et seq . (§ 801 et seq .)] . . . . . . . . . . . . . . . . . . . .
. 25
Appendix B: ACA Mission, Values and Collector’s Pledge . . . . . .
. . . . . . . . . 39
Appendix C: Glossary . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 40
Appendix D: ACA International Code of Ethics and Operations . . . .
. . . . . . . 51
©2011 ACA International. All Rights Reserved. 3
Introduction & BackgroundIntroduction and Background
§ 801 and § 802 [15 U.S.C. § 1601 and § 1692]
Collection agencies and debt collectors are extremely important to
the United States and International economies as well as the credit
granting community. Debt collectors help keep the cost of products
and services from skyrocketing; they put the money back into the
community and help keep creditors in business. Industry research
suggests that the collection industry contributes almost 50 billion
dollars per year to the United States’ economy. Collection efforts
are linked directly to lowering the costs of goods and services and
saving money for individual families because they do not have to
cover the costs of consumers who do not pay their just debts.
Through the efforts of the collection industry, the average family
in the United States saves almost $500 per year.
The Fair Debt Collection Practices Act (“FDCPA”)1 was passed in
1977 and became law in March of 1978. It was designed to protect
consumers and eliminate abusive, deceptive and unfair debt
collection practices. It was also created to help ensure ethical
debt collectors were not competitively disadvantaged and to promote
consistent State action to protect consumers.2 The FDCPA has been
interpreted by court decisions and government regulatory agencies,
such as the Federal Trade Commission (“FTC”), which has enforcement
authority under the FDCPA.3 However, the core concepts of promoting
ethical collection practices and eliminating abusive collection
tactics have not changed.
1 15 U.S.C. § 1692 et seq. (§ 801 et seq.). 2 15 U.S.C. § 1692 (§
802). 3 15 U.S.C. § 1692l (§ 814).
©2011 ACA International. All Rights Reserved.4
Appropriate Third-Party
Appropriate Third-Party Contacts § 804 [15 U.S.C. § 1692b]
Generally, under the FDCPA, debt collectors may only talk to the
“consumer” when collecting a debt. The consumer is any natural
person obligated or allegedly obligated to pay any debt.4 One very
specific and narrow exception to this rule involves talking to
neighbors, people in the surrounding neighborhood (known as
“nearbys”), family members, friends, co- workers and other people
who are not the consumer.
People other than the consumer are called “third parties.” When a
debt collector contacts a third party to try to locate the
consumer, it is commonly referred to as “skiptracing.” In some
instances, a debt collector calls a phone number thinking it is a
number for the consumer. Whether a debt collector is talking to
someone trying to locate the consumer, or happens to reach a number
that no longer belongs to the consumer, there is certain
information the debt collector must provide, can request and must
not disclose.
When skiptracing, a debt collector may ask for “location
information,” which the FDCPA defines as “a consumer’s place of
abode and his telephone number at such place, or his place of
employment.”5 Debt collectors are prohibited from requesting any
other information, such as the consumer’s work schedule, salary,
pay schedule, supervisor’s name, work history, work schedule, or
any other information.6 Debt collectors can attempt to verify a
consumer’s employment by contacting the consumer’s workplace. In
that instance, a debt collector can state he or she is trying to
verify the consumer’s employment with the company, but no
additional information can be requested.
When talking to a neighbor, nearby or any other third party, debt
collectors are prohibited from talking about the debt.7 A debt
collector must provide his or her name and state that he or she is
calling to confirm or correct “location information” about the
consumer.8 If the third party asks who you work for, the name of
your company or where you are calling from, the debt collector can
identify his or her employer, even if the name of the company
discloses the existence of a debt. Debt collectors cannot provide
any details about the debt and cannot confirm whether or not a debt
exists. If a third party asks what the call is about, the debt
collector may not disclose that a debt exists. Rather, the debt
collector should tell the third party that the purpose of the call
is confidential. If a third party volunteers information beyond the
consumer’s home address, home phone number or place of employment,
the information can be documented in the collection notes, but
should indicate that the information was volunteered by the third
party, not requested.
Debt collectors can contact a third party once to request
information. Any additional calls will violate the FDCPA’s
guidelines regarding acquiring location information9 and will
4 15 U.S.C. § 1692a(3) (§ 803(3)). 5 15 U.S.C. § 1692a(7) (§
803(7)). 6 FTC Statements of General Policy or Interpretation Staff
Commentary on the FDCPA, 53 Fed. Reg. 50097, 50103 (Dec. 13, 1988);
Kwait, FTC Informal Staff Letter (Jan. 24, 1989). 7 15 U.S.C. §
1692b(2) (§ 804(2)). 8 15 U.S.C. § 1692b(1) (§ 804(1)). 9 15 U.S.C.
§ 1692b(3) (§ 804(3)).
©2011 ACA International. All Rights Reserved. 5
Appropriate Third-Party Contacts
likely be considered to be harassing and abusive by causing a phone
to ring repeatedly or continuously.10 The general rule to remember
when skiptracing is “One and done.” Debt collectors get one contact
to try to obtain location information. There are only two
situations in which a debt collector can contact a third party a
second time: (1) to update or correct information supplied earlier
by that third party; or (2) if requested to do so by the third
party.11 There must be a valid reason for believing the third party
has updated or corrected information to help contact the consumer.
These reasons must be documented in the collection notes.
If a third party asks why the debt collector is calling or if the
debt collector is calling from a collection agency, the response
cannot reveal the existence of or details regarding the debt. The
debt collector may respond by stating something like, “I am sorry,
that is confidential information” or “it is a personal business
matter.” As previously noted, if the third party asks the debt
collector who his or her employer is, that information must be
provided.12
Debt collectors sometimes speak with third parties who do not know
the consumer and do not have contact information for the consumer.
When skiptracing or using outdated contact information, debt
collectors might contact an individual who has the same last name
or the same first and last name as the consumer. Regardless of how
a debt collector gets in contact with a wrong party, the debt
collector’s obligations when speaking to these third parties are
the same as when speaking with a neighbor, nearby, friend, family
member or co-worker.
Debt collectors should provide their name and the purpose of the
call, which is to confirm or correct location information.13 If the
third party expressly requests it, the debt collector must identify
his or her employer.14 If the third party does not know the
consumer, has no contact information for the consumer or is the new
owner of the consumer’s old phone number, the information must be
documented in the collection notes and the incorrect contact
information removed from the account. The only information that can
be requested from the third party is the consumer’s home address,
home phone number and place of employment.15
When talking with any third parties, debt collectors must remain
professional and limit requests for information to “location
information.” The “one and done” concept applies to contacting
neighbors, family members, friends, nearbys, co-workers and wrong
parties (who are usually contacted by chance due to outdated
contact information).
10 15 U.S.C. § 1692d(5) (§ 806(5)). 11 15 U.S.C. § 1692b(3) (§
804(3)). 12 15 U.S.C. § 1692b(1) (§ 804(1)). 13 15 U.S.C. §
1692b(1) (§ 804(1)). 14 15 U.S.C. § 1692b(1) (§ 804(1)). 15 15
U.S.C. § 1692a(7) (§ 803(7)).
©2011 ACA International. All Rights Reserved.6
Right-Party Communications Right-Party Communications
(Who Collectors Can Talk To) § 805 [15 U.S.C. § 1692c]
The people with whom a debt collector may discuss a debt are known
as “right parties.” When talking to right parties, debt collectors
are not limited to requesting location information (home phone
number, home address and place of employment). Rather, when talking
to a right party, debt collectors can talk about the debt and try
to collect it. It is important to remember that regardless of the
basis on which a debt collector is authorized to talk to a right
party, individuals other than the consumer may not be responsible
for paying the debt from their personal funds. “Right parties” fall
into three general categories: by relationship, by contract or by
law.
Right Parties By Relationship Some people are right parties because
of their relationship with the consumer. The person who owes the
debt is known as the “consumer.”16 A consumer is “any natural
person obligated or allegedly obligated to pay any debt.”17 If a
consumer is a minor as defined by state law, the consumer’s parents
are considered Right Parties18 with whom the debt may be discussed.
In most states, anyone under the age of 18 is considered a minor.
However, there are some states where anyone under 19 or 21 is a
minor.19 Debt collectors should know where in the collection notes
to find the consumer’s date of birth, if it is available, to
determine whether or not the consumer is a minor. If the date of
birth information is not available, debt collectors will need to
find another way to determine the consumer’s age or, to be safe,
not talk to the consumer’s parents. Debt collectors can still speak
with the consumer regarding the debt. The consumer’s spouse is a
right party under the FDCPA. However, debt collectors need to be
cautious of the state law where the consumer lives to determine
whether or not a debt can be discussed with a spouse as the state
law may not allow such communication. The Federal Trade Commission
stated that using an interpreter to provide information to a
non-English speaking consumer about the debt would not violate the
FDCPA.20 When in doubt, do not disclose information about the debt
to someone other than the consumer. Even though a debt collector
may be allowed to talk to people other than the consumer about the
debt, those other parties may not be responsible for paying the
debt.
Right Parties By Contract Some third parties become right parties
by contract. This covers situations in which the consumer has
entered into an agreement with a third party authorizing the third
party to handle the financial affairs of the consumer. The most
common example of a right party by contract is
16 15 U.S.C. § 1692a(3) (§ 803(3)). 17 15 U.S.C. § 1692a(3) (§
803(3)). 18 15 U.S.C. § 1692c(d) (§ 805(d)). 19 Alabama (19),
Colorado (21), Mississippi (21), Nebraska (19), Puerto Rico (21),
West Virginia (21). 20 Zbreznj, FTC Informal Staff Letter (Sept.
21, 1992).
©2011 ACA International. All Rights Reserved. 7
Right-Party Communications
an attorney. An attorney is defined as a person who went to law
school and is licensed to practice law in at least one state in the
United States.21 This is different from a power of attorney or an
attorney-in-fact (described later). If a debt collector knows or
should know that a consumer is represented by an attorney, the debt
collector is authorized to communicate with the attorney only. When
the consumer is represented by an attorney, the consumer is no
longer a right party and may not be contacted about the debt. It is
vital to obtain and update the collection notes with the attorney’s
contact information. Collection agencies should have policies and
procedures for how to properly document and code the account so it
is routed to the proper queue. Once the attorney is represented by
an attorney, the only person a debt collector can communicate with
is the attorney.22 Debt collectors may not contact the consumer nor
may debt collectors contact a third party to attempt to obtain
location information.
The second type of right party by contract is a power of attorney
or an “attorney-in-fact.” Through a power of attorney document, the
consumer provides another person authority to act as his or her
representative for the matters detailed in the document. Debt
collectors should request a copy of the document authorizing the
power of attorney to make sure the designated third party has the
correct permission to discuss the debt. For example, if a document
gives a third party permission to make health care decisions, this
is limited authority that would not allow a debt collector to
discuss the debt with the third party. Make sure to receive a copy
of the power of attorney document and update the collection file
with the permission to talk to the power of attorney. The power of
attorney document will provide permission to talk to a specific
person. Debt collectors may speak with the consumer about the debt,
unless the consumer sends a cease communication notice.23 It is
important to remember that just because a debt collector may
discuss the debt with the attorney in fact or power of attorney,
this does not mean the attorney in fact is responsible for paying
the debt. The FDCPA provides that to talk to any third party
regarding the debt, a debt collector needs “the prior consent of
the consumer given directly to the debt collector,” so while having
the documentation is strongly encouraged, obtaining the consent
from the consumer is required.24
The last type of right party is a right party by contract, which
includes companies such as consumer credit counseling services,
debt settlement companies and debt management companies. These
businesses are designed to help a consumer work through their debt
issues. The companies can become a right party if the consumer
authorizes a debt collector to discuss the debt with the company.
Whether or not a debt collector should require written
authorization to discuss the debt with the company or whether
verbal permission is enough will depend on the collection agency’s
policies and procedures. Similar to powers of attorney, with
consumer credit counseling and debt management companies, debt
collectors are still allowed to contact the consumer regarding the
debt, unless the debt collector receives a cease communication
notice from the consumer.
Right Parties By Law The final method of becoming a right party is
through operation of law. Examples include a guardian, a personal
representative, an executor or an administrator. If a consumer is
unable to handle his or her own affairs, a person is appointed by
the court to assist the consumer in handling his or her financial
and other issues. This person is a guardian or conservator.
Debt
21 Edwards, FTC Informal Staff Letter (Feb. 7, 1991). 22 15 U.S.C.
§ 1692c(a)(2) (§ 805(a)(2)). 23 Cease communication requests are
discussed beginning on page 20. 24 15 U.S.C. § 1692c(b) (§
805(b)).
©2011 ACA International. All Rights Reserved.8
Right-Party Communications
collectors should ask the guardian or conservator to send the
documentation that appointed him or her to that position.
Similarly, when an individual dies, someone is appointed to make
sure all of the bills and other matters are handled. This person is
a personal representative or an executor. This documentation should
also be requested for proper account documentation. A guardian,
conservator, executor, personal representative, power of attorney,
consumer credit counseling service, debt settlement company or debt
management company may be authorized to discuss the debt with the
collection agency, but they are not responsible for paying the debt
from their personal funds.
What Collectors Can Say § 807(11) [15 U.S.C. § 1692e(11)]
Once a debt collector has identified that he or she is speaking to
a right party, the debt collector needs to know what to say and
what not to say. In addition to any information required by the
collection agency or the specific client, the debt collector must
identify him or herself and tell the consumer why he or she is
calling. Generally, the debt collector will identify his or her
name, the name of the collection agency, the name of the creditor
and the amount due on the debt. This information is generally
enough to meaningfully identify the debt collector.25 Debt
collectors must also provide a notice to the consumer disclosing
the purpose of the call. This is commonly referred to as the
“mini-Miranda” disclosure. Commonly accepted phrasing of this
disclosure is, “This is an attempt by a debt collector to collect a
debt. Any information obtained will be used for that purpose.”26
Another example is, “I am required to tell you this communication
is from a debt collector and is an attempt to collect a debt. Any
information obtained will be used for that purpose.” After the
first telephone communication with the consumer, a debt collector
must disclose that the communication is from a debt collector.27
However, some state specific laws require the full mini-Miranda28
be included in all communications with the consumer. Debt
collectors must be aware of the additional state
requirements.
When Debt Collectors Can Contact § 805(a)(1) [15 U.S.C. §
1692c(a)(1)]
Whether a debt collector contacts a right party to attempt to
collect a debt or a third party to try to locate the consumer,
there are specific guidelines addressing when collection and
skiptracing calls can be placed. The FDCPA provides that unless a
debt collector has reason to believe it is inconvenient for the
consumer, debt collectors may attempt collection and skiptrace
efforts between 8:00 am and 9:00 pm in the consumer’s time zone.29
Any calls outside this time frame violate the FDCPA unless the debt
collector has permission from the right party or a third party to
contact that party during a different time frame. Debt collectors
should review their agency’s policies and procedures regarding
whether or not such permission
25 15 U.S.C. § 1692d(6) (§ 806(6)). 26 15 U.S.C. § 1692e(11) (§
807(11)). 27 15 U.S.C. § 1692e(11) (§ 807(11)). 28 This is an
attempt to collect a debt. Any information obtained will be used
for that purpose. 29 15 U.S.C. § 1692c(a)(1) (§ 805(a)(1)).
©2011 ACA International. All Rights Reserved. 9
Right-Party Communications
can be verbal or must be submitted in writing. Any permission to
call outside of the FDCPA’s permitted calling times must be
documented in the collection notes.
The FDCPA prohibits calls at times that are known or should be
known to be inconvenient for the person being called.30 For
example, a consumer who works nights is likely sleeping until late
in the morning or early afternoon. Calls before noon in the
consumer’s time zone are likely inconvenient for that individual.
Collection calls placed on Sundays do not violate the FDCPA on its
face, unless the collector knows or should know that such a contact
is inconvenient. If a consumer requests that contacts on a
particular day be stopped, the debt collector should honor that
request.31 Debt collectors are not prohibited from contacting
consumers on holidays. However, if the collector knows or has
reason to know that communicating on a holiday would be
inconvenient, the debt collector should not contact the consumer.
This is especially so during religious or cultural holidays.
Whenever a debt collector knows, should know or has reason to know
of the inconvenience to the consumer, the information should be
documented in the collection notes and any other place that will
alert others working the account about the restrictions on
contacting the consumer.
How Collectors Can Contact The impact of technology on the
collection industry brings both benefits and potential liability.
On one hand, technology improves access to critical information
with every advancement. However, with that efficiency comes an
increased risk of disclosure and challenges in the courts.
Remember, a collector may not reveal the existence of a debt to any
third party in connection with the collection of a debt. Collectors
must use special care when determining how to communicate with a
consumer. Think about the different types of technology you use on
a day-to-day basis to communicate: computers/e-mail, cell phones,
text messaging, caller ID, answering machines, voicemail, fax
machines - the list goes on.
With fax machines and e-mail, there is a high degree of risk for
third-party disclosure. Much like a postcard, faxes and e-mail are
an open-faced communication, which may be seen by others. An e-mail
may be a shared account or others may have access to the e-mail
address. There is limited, if any, right to privacy in a work
e-mail as an individual’s employer, supervisor or assistant may
have full access to read e-mails. In addition, the Internet Service
Provider, or ISP, reserves the right to review any e-mail that is
sent to, sent from or stored on its servers. With text messaging,
Twitter and Facebook, there are a limited number of characters
available. While this has lead to a “text language” involving terms
such as OMG, LOL and IDK, just to name a few, the character
limitations are prohibitive when compared to the amount of
information that must be provided in a communication with the
consumer. After providing the name of the creditor, amount of the
debt and the mini-Miranda, there are limited or no characters
remaining for state special text requirements or identifying the
name of the collection agency or name of the debt collector. When
dealing with calls and text messages to cellular telephones, there
is a concern when using an auto-dialing device without the
consumer’s prior express consent, not to mention the consumer could
potentially incur a charge for the text message or call. In
addition to concerns of using a dialer to call a cell phone, the
Telephone Consumer Protection Act or TCPA prohibits leaving
prerecorded voice messages on any residential or cellular phone
without the consumer’s consent. These concerns
30 15 U.S.C. § 1692c(a)(1) (§ 805(a)(1)). 31 FTC Statements of
General Policy or Interpretation Staff Commentary on the FDCPA, 53
Fed. Reg. 50097, 50103-04 (Dec. 13, 1988).
©2011 ACA International. All Rights Reserved.10
Right-Party Communications
barely scratch the surface of issues regarding incorporating
different methods of technology into the collection process. As the
FDCPA was enacted prior to most of these technological
advancements, the FDCPA does not address the use of these emerging
technologies. Debt collectors should consult their company policy
on how their agency incorporates technology into the collection
process.
©2011 ACA International. All Rights Reserved. 11
Avoiding Harrassment and Abuse
Avoiding Harassment and Abuse § 806 [15 U.S.C. § 1692d]
Everyone interprets harassment and abuse differently. A debt
collector must not harass or abuse the consumer, right parties or
any third parties. It is difficult to define what exactly
harassment and abuse are, but examples of harassing and abusive
conduct are helpful to describe their meanings. Harassment and
abuse are not limited to the actions specifically described in the
FDCPA. Examples of harassment and abuse come out of lawsuits where
a court has determined that the debt collectors’ actions were
harassing and or abusive. It is important to look at the examples
as examples and not to assume that a debt collector’s behavior is
acceptable because something was said or done that is not
specifically prohibited or described in section 806 of the FDCPA.
Collection professionals need to develop a feel for when the line
between effective collection practices and harassment and abuse is
crossed. Debt collectors should always remain professional and
never cross that line into unprofessional, unethical, harassing or
abusive conduct.
Debt collectors may not use obscene or profane language in
collection or skiptracing calls.32 This includes more than just
swearing. It includes any language that could be offensive to the
consumer or any third party. Sometimes certain language is abusive
to one person but not another. If a statement would shock, anger or
upset an individual, it is probably abusive. Some examples include
using religious slurs and calling the consumer a deadbeat or a
liar.33
Tone of voice can turn an acceptable call into a harassing or
abusive call. If a debt collector yells or raises his or her voice,
it could be harassing. The tone of voice or inflection of choice
words can change the meaning of a statement. Harassment and abuse
is not just about what a debt collector says, but how he or she
says it. Debt collectors should always consider tone of voice when
on a collection or skiptracing call.
Collectors can get upset or frustrated during collection and
skiptracing calls. Debt collectors must learn to stay calm and
professional. A heated call that turns angry can quickly turn into
an abusive call. Debt collectors should determine what type of
techniques will work to stay calm and professional, such as deep
breathing, transferring the call to a supervisor or dispute
resolution desk, politely terminating the call, asking probing
questions or trying to find an alternate payment solution or money
source. Debt collectors frequently find that frustration goes both
ways. When dealing with an upset, irate, angry or screaming
consumer, it is important to stay calm and professional and
maintain control.
Prior to the FDCPA, creditors and collection agencies would
advertise (or threaten to advertise) debts for sale and publish the
names of the consumers in the hope that the consumer would pay out
of shame and embarrassment. Although this may be an extreme
example, debt collectors must be aware that attempts to embarrass
the consumer into paying on the debt is harassment under the
FDCPA.34
32 15 U.S.C. § 1692d(2) (§ 806(2)). 33 FTC Statements of General
Policy or Interpretation Staff Commentary on the FDCPA, 53 Fed.
Reg. 50097, 50105 (Dec. 13, 1988). 34 15 U.S.C. § 1692d(3) (§
806(3)).
©2011 ACA International. All Rights Reserved.12
Avoiding Harrassment
and Abuse
Repeatedly calling the consumer and causing the phone to ring to
annoy the consumer is harassment.35 When deciding whether multiple
calls are harassing, courts typically look at the frequency of the
calls as well as the pattern in which the calls occur.36 Debt
collectors working on an automated dialer may not be in control of
the dialer campaigns, which dictate how often calls are placed. The
FDCPA prohibits causing a telephone to ring repeatedly. Even if no
contact is made or no message is left, Caller ID will track the
number and frequency of the calls, which could result in potential
FDCPA liability. Some states have very specific rules addressing
the frequency of attempts to contact a consumer.
The FDCPA prohibits threats of violence and threatening police
action or other law enforcement activity.37 Such threats are
harassment whether directed towards the consumer, right parties or
third parties.
The FDCPA restricts debt collectors from threatening actions that
cannot or will not be taken.38 A debt collector must have both the
authority and the intent to take a specific action to notify a
right party of the specific collection activity. Debt collectors
cannot threaten to repossess a consumer’s car, garnish a consumer’s
wages or any other action unless the debt collector has the
authority as well as the intent to follow through.39 When
attempting to collect debts by filing lawsuits, debt collectors
need to make sure the account satisfies the creditor’s and the
agency’s guidelines for filing suits. If a collection agency does
not sue on debts under $1,000, a debt collector cannot threaten
legal action on a debt that is less than $1,000. Each debt has a
specific amount of time where a creditor can choose to file a
lawsuit to attempt to collect the debt, known as a statute of
limitations. When collecting on a debt that is past the statute of
limitations, threatening a lawsuit on that debt violates the
FDCPA.40 A few states eliminate the debt when the statute of
limitations passes.41 In those states, debt collectors cannot
pursue any attempts to collect the out of statute debts. Still
other jurisdictions require special notices or disclosures be
provided when collecting on debts that are past the statute of
limitations.42
35 15 U.S.C. § 1692d(5) (§ 806(5)). 36 See Akalwadi v. Risk Mgmt.
Alternatives, Inc., 336 F. Supp. 2d 492 (D. Md. 2004). 37 15 U.S.C.
§ 1692d(1) (§ 806(1)). 38 15 U.S.C. § 1692e(5) (§ 807(5)). 39 15
U.S.C. § 1692e(4) (§ 807(4)). 40 Freyermuth v. Credit Bureau
Servs., Inc., 248 F.3d 767 (8th Cir. 2001). 41 Mississippi and
Wisconsin. 42 New Mexico, New York City and North Carolina.
©2011 ACA International. All Rights Reserved. 13
Avoiding False and Misleading Statements
Avoiding False and Misleading Statements § 807 [15 U.S.C. §
1692e]
The FDCPA prohibits false and misleading statements during
collection and skiptracing calls.43 Debt collectors may not say or
imply anything that is untrue. Debt collectors cannot lie to a
consumer, right party or third party in attempting to collect the
debt or in attempting to obtain location information. This includes
“little white lies” and lies that debt collectors think will not be
discovered or will not harm the consumer or anyone else. Whether or
not a collection agency is recording calls, the consumer, right
party or third party might record the call. Savvy debt collectors
assume every call is being recorded and make sure everything the
collector says is true to avoid violating the prohibition against
false and misleading statements.
Consumers are often more concerned if they believe the state or
federal government is involved. The FDCPA prohibits any
representation or implication that the debt collector is vouched
for, bonded by or affiliated with the government.44 Debt collectors
cannot misrepresent that the government is backing their collection
efforts.
Another common problem is misstating the amount, legal status or
character of the debt.45 Debt collectors must accurately provide
the amount of the debt when communicating with right parties. Debt
collectors may not imply or suggest that legal action has or is
close to being filed if it is not true. In addition, debt
collectors may not falsely indicate that a debt collector has a
lien against the consumer’s assets or that a judgment has been
obtained if the representations are not true.
In an often-quoted FDCPA decision, a judge wrote that when an
attorney is involved in the collection of a debt, the consumer
believes “the price of poker has just gone up.”46 Debt collectors
may reference an attorney’s involvement in the collection efforts
only if an attorney is actually involved in the collection efforts.
A debt collector may not try to make a consumer think an attorney
is involved in the debt collection when, in fact, an attorney is
not so involved.
One of the abuses that occurred before the enactment of the FDCPA
was the threat of imprisonment if the consumer did not pay a
debt.47 While such a statement will most likely create fear in the
consumer and may encourage payment, it is a clear violation of the
FDCPA. The concept of a “debtor’s prison” ended long before the
FDCPA was enacted. There is no justification for telling a consumer
that he or she will face jail time if the debt is not paid.
43 15 U.S.C. § 1692e (§ 807). 44 15 U.S.C. § 1692e(1) (§ 807(1)).
45 15 U.S.C. § 1692e(2)(A) (§ 807(2)(A)). 46 Avila v. Rubin, 84
F.3d 222, 229 (7th Cir. 1996). 47 15 U.S.C. § 1692e(4) (§
807(4)).
©2011 ACA International. All Rights Reserved.14
Avoiding False and Misleading
Statements
Some violations of the FDCPA fall into two areas. The most common
example relating to false and misleading conduct is the
mini-Miranda.48 The failure to give the mini-Miranda violates the
requirement to provide meaningful disclosure of the debt
collector’s identity49 as well as the requirement to provide the
disclosure itself.50 Recent court decisions have found that a live
or a pre-recorded voicemail message is a communication that
requires meaningful disclosure, including the name of the
collection agency and the mini-Miranda disclosure.51 Many other
courts have adopted this same reasoning,52 prompting some
collection agencies to leave what has come to be known as a Foti
message. Other agencies do not leave voicemail messages. Debt
collectors should take special care to follow their agency’s policy
regarding leaving voicemail messages.
When identifying the collection agency, debt collectors must be
careful to use the agency’s correct name. It is a violation of the
FDCPA to use any business name other than the actual name of the
agency.53 Debt collectors may provide a registered trade name of
the collection agency. If the name or initials of the company are
not registered as a trade name, the acronym or nickname of the
company must not be used.
Some debt collectors provide information regarding debts to
consumer reporting agencies (commonly known as credit bureaus).
Such companies are “data furnishers.” However, this does not make
the company a credit bureau or a consumer reporting agency. Debt
collectors may not tell a consumer that the company is a consumer
reporting agency if the company, in fact, is not a consumer
reporting agency.54 Debt collectors must be careful when
referencing credit reporting activities so the debt collector does
not misrepresent a data furnishing collection agency as a consumer
reporting agency.
48 This is an attempt to collect a debt by a debt collector and any
information obtained will be used for that purpose. 49 15 U.S.C. §
1692d(6) (§ 806(6)). 50 15 U.S.C. § 1692e(11) (§ 807(11)). 51 Foti
v. NCO Fin. Sys., Inc., 424 F. Supp. 2d 643 (S.D.N.Y. 2006). 52
See, e.g., Inman v. NCO Fin. Sys., Inc., Civ. A. No. 08-5866, 2009
WL 3415281 (E.D. Pa. Oct. 21, 2009); Niven v. Nat’l Action Fin.
Servs., Inc., No. 8:07-CV-1326-T-27TBM, 2008 WL 4190961, *2 (M.D.
Fla. Sept. 10, 2008); Ramirez v. Apex Fin. Mgmt., LLC, 567 F. Supp.
2d 1035 (N.D. Ill. 2008); Baker v. Allstate Fin. Servs., Inc., 554
F. Supp. 2d 945, 952 (D. Minn. 2008); Edwards v. Niagara Credit
Solutions, Inc., 586 F. Supp. 2d 1346, 1359 (N.D. Ga. Nov. 13,
2008); Costa v. Nat’l Action Fin. Servs., No. CIV. S-05-2084
FCD/KJM, 2007 WL 4526510 (E.D. Cal. Dec. 19, 2007); Masciarelli v.
Richard J. Boudreau & Assocs., 529 F. Supp. 2d 183 (D. Mass.
2007). 53 15 U.S.C. § 1692e(14) (§ 807(14)). 54 15 U.S.C. §
1692e(16) (§ 807(16)).
©2011 ACA International. All Rights Reserved. 15
Avoiding Unfair Practices
Avoiding Unfair Practices § 808 [15 U.S.C. § 1692f]
The FDCPA prohibits “unfair practices” in debt collection attempts.
Debt collectors may not use any unfair or unconscionable means to
collect a debt. As with the other sections discussed, the FDCPA
provides examples of unfair practices, but does not list all types
of unfair practices that could violate the statute.55
The amount a consumer owes on a debt is limited by the agreement
between the creditor and the consumer. The creditor may not attempt
to collect more than what is owed. Debt collectors have the same
limitations. It is an unfair practice to try to collect more than
is legally owed.56
One of the provisions of the FDCPA allows an agency to accept
checks from a consumer that are dated for cashing or processing in
the future. This is often done when there is an agreed upon payment
plan. Rather than trust that the consumer will remember to send in
future payments, the agency requires “post dated” checks that the
agency can deposit at the appropriate date. The FDCPA requires a
written notice be sent to the consumer 3 to 10 days before the
agency deposits a check post-dated by more than 5 days.57 Failure
to provide this notice or depositing a check before the date on the
check is an unfair practice. This section generally will require
written notice to the consumer before processing any payment post-
dated by more than 5 days, including credit or debit card
transactions. The notice serves as a reminder to the consumer that
the payment will be processed so the consumer will have money
available to cover the payment, or provide the consumer with enough
time to cancel the payment if he or she does not have enough money
for the payment.
The prohibition against unfair practices tends to be a “catch-all”
provision. Most violations of other sections could also violate
this section. Examples include causing a consumer to incur charges
by concealing the true purpose of the call.58 While this was more
common with placing collect telephone calls, it is also a concern
with the increased use of cellular phones. Some consumers are
charged for the call or the call counts against the consumer’s
allotment of minutes in the cellular plan. As with many areas under
the FDCPA, contacting consumers by cellular phone is an evolving
concern as technology changes.
Communication using postcards is a violation of the FDCPA.59 Post
cards are an “open face” communication, which means anyone,
including third parties, can see what the postcard says and find
out about the debt. There are similar concerns about communications
sent by fax or by e-mail to a consumer. There are a number of
concerns regarding use of technology that was not available when
the FDCPA was enacted. Debt collectors should refer to their
supervisor and the collection agency’s policies and procedures when
communicating with these methods.
55 15 U.S.C. § 1692f (§ 808). 56 15 U.S.C. § 1692f(1) (§ 808(1)).
57 15 U.S.C. § 1692f(3) (§ 808(3)). 58 15 U.S.C. § 1692f(5) (§
808(5)). 59 15 U.S.C. §1692f(7) (§808(7)).
©2011 ACA International. All Rights Reserved.16
The Danger of Overshadowing The Danger of Overshadowing
§ 809 [15 U.S.C. § 1692g]
Collection agencies must give the consumer certain information
about the debt and how to dispute the debt. The information must be
provided to the consumer within five days of the initial
communication with the consumer. To make sure the information is
provided within this timeframe, the information is generally sent
to the consumer in a letter that is sent shortly after the debt is
placed with the collection agency. The details that are provided
include: the amount of the debt; the name of the creditor;
information about how to dispute the debt; how to request
documentation supporting the debt; and what to do if the consumer
does not recognize the name of the creditor.60 This information is
known as the “validation notice.” Once the consumer receives the
validation notice, the consumer has 30 days to dispute the debt.
The 30-day time frame is known as the “validation period.”
Remember, the 30-day time frame starts when the consumer receives
the notice, not when the notice is sent.
If the consumer sends a written dispute to the collection agency
within the validation period, collection efforts must stop.61 The
collection agency then has two choices: either provide the consumer
with verification of the debt (documentation supporting the debt);
or cease all collection activity.62 If the collection agency does
not have or cannot obtain supporting documentation from the
creditor, collection activity must remain ceased.
If the consumer disputes the debt verbally, but does not send a
written dispute, collection efforts do not have to stop and the
agency does not have to send verification. However, the collection
agency will have to follow its policies and procedures for handling
a dispute.63 The collection agency may decide to send supporting
documentation about the debt based on a verbal dispute. No matter
when the consumer verbally disputes the debt, the collection agency
may not assume the debt is valid. This means the collection agency
may have to find additional support for attempting to collect the
debt or might not be able to collect the full amount of the debt.
Payments made on the debt cannot be applied to the disputed portion
of the debt. For example, a consumer might disagree with the late
fees or the amount of interest included in the full balance.
Payments may not be applied to the disputed portion of the debt.
The creditor may need to justify the amounts being charged for the
collection agency to continue collecting on the disputed portion of
the debt.
Because the consumer has a limited amount of time to dispute the
debt, debt collectors must be careful about what they say during
the 30-day validation period. Debt collectors cannot say anything
that would be confusing to the consumer or that would make the
consumer think the 30-day time frame to dispute the debt no longer
exists. It is a violation of the FDCPA to confuse the consumer,
contradict the information in the validation notice, or say
anything that might cause the consumer to ignore the right to
dispute the debt. This is “overshadowing.”64 The validation notice
must be clear to the consumer. There are several ways in which
overshadowing can occur.
60 15 U.S.C. § 1692g (§ 809). 61 15 U.S.C. § 1692g(b) (§ 809(b)).
62 Jang v. A.M. Miller & Assoc., 122 F.3d 480, 483 (7th Cir.
1997). 63 See the next section on “Responding to Disputes” for more
information. 64 15 U.S.C. § 1692g(b) (§ 809(b)).
©2011 ACA International. All Rights Reserved. 17
The Danger of Overshadowing
Collection agencies might have authority to settle the debt for
less than the full balance owed. Some collection agencies will send
out collection letters that make an offer to settle the debt. Debt
collectors need to know what offer was made to the consumer so a
contradictory offer is not made in a collection call. If the letter
has an expiration date, the debt collector cannot change that date
in a phone call by having the date expire sooner than the
letter.
Debt collectors may offer the consumer a settlement of the debt, if
authorized by both the creditor and the collection agency. When
making a settlement offer, debt collectors must make sure the offer
is within the creditor’s settlement guidelines. If the settlement
has an expiration date, the settlement offer may not expire before
the validation period expires. Any settlement offer that might
cause the consumer to give up the right to dispute the debt to take
advantage of the settlement offer violates the FDCPA. All
settlement offers or payment arrangements should be well documented
in the collection notes so other collectors do not contradict the
offer. This is also important so collection letters do not
contradict offers made in collection calls.
Demands for payment can overshadow the validation period even if
the demand does not offer a settlement. Demands for payment with a
due date that occurs before the validation period expires
overshadow the validation notice and violate the FDCPA. For
example, a demand for payment by Friday will violate the FDCPA if
the validation notice was sent on Monday. The consumer might not
have received the letter yet. Even if the consumer did receive the
letter, he or she still has time to exercise the rights listed in
the letter. A demand for payment cannot influence the consumer to
give up his or her right to dispute the debt. Creating a false
sense of urgency or making the consumer feel like he or she has to
give up the right to dispute the debt will overshadow the
validation period. Even if a due date is not specified, words like,
“immediately,” “as soon as possible” and “urgent,” conflict with
the 30- day period in the validation notice.
Telling the consumer the collection agency will report the debt to
a consumer reporting agency if he or she does not pay or
threatening legal action can also overshadow the validation notice.
To avoid getting sued for a debt or to avoid having a debt listed
on a consumer report, the consumer might give up his or her right
to dispute the debt, even if he or she believes the debt does not
belong to him or her. When authorized to take these types of
actions, debt collectors must be very careful in how payment is
demanded. Even if the agency or the creditor will report the debt
to a consumer reporting agency or will file suit on the debt, the
consumer still has the right to dispute the debt. Do not contradict
that right or confuse the consumer into giving up that right.
©2011 ACA International. All Rights Reserved.18
Responding to Disputes Responding to Disputes
§ 809(b) [15 U.S.C. § 1692g(b)] § 807(8) [15 U.S.C. §
1692e(8)]
Consumers can dispute their debts in many different ways. How and
when the dispute is raised makes a difference in how collection
agencies respond to the dispute. A consumer dispute simply means
that the consumer questions or refuses responsibility for the debt.
There are no specific words that a consumer must say to dispute the
debt. In fact, the consumer might not even use the words, “I
dispute this debt.” More often than not, a consumer will dispute
the debt by saying something like: “That’s not my debt;” “I don’t
owe that much;” “I was the victim of identity theft;” “I thought I
paid that off;” “I never saw that doctor;” or “They told me I
wouldn’t be charged interest or a late fee.”
Debt collectors must listen carefully for any indication that a
consumer disputes a debt. Collection agencies should have policies
and procedures to guide debt collectors in handling consumer
disputes and what to do in response to the dispute. It is not for
the debt collector to decide if a dispute is legitimate. Rather,
the debt collector must document the dispute very clearly in the
collection notes and properly code the account.
How a consumer submits a dispute impacts the response a debt
collector or collection agency must take to respond to the dispute.
A consumer can dispute the debt verbally while on the phone with a
collector, or a consumer can dispute the debt in writing by sending
a letter to the agency or the creditor.
If the consumer disputes the debt in writing within the 30 day
validation period the collection agency will proceed in one of two
ways. The agency will either suspend all collection activity until
it receives and sends back up documentation regarding the debt to
the consumer or all collection attempts on the debt will be
ceased.65 Once back up documentation supporting the debt is sent to
the consumer, collection efforts can start again.
Some collection agencies do send back up documentation, or
verification of the debt, in response to a verbal dispute during
the validation period, but this is not required by the FDCPA. After
the 30-day validation period, a consumer can still dispute the debt
verbally or in writing. The dispute must be clearly noted in the
collection notes. Under the FDCPA, the collection agency does not
have to stop collecting and does not have to send back up
documentation but there are very specific guidelines regarding
processing payments on a disputed debt. Under the FDCPA, payments
cannot be credited to a disputed debt. Generally, if the consumer
disputes the entire debt, he or she will not send a payment. If the
consumer has more than one debt, payments can be applied to the
debts that are not disputed. If the consumer disputes part of the
debt, such as the interest or late fees, a payment can be applied
to the principle balance, but not applied to the interest or late
fees. Even if the 30-day validation period is over, a disputed debt
must be handled carefully and be well-documented in the collection
notes.
65 Jang v. A.M. Miller & Assoc., 122 F.3d 480, 483 (7th Cir.
1997).
©2011 ACA International. All Rights Reserved. 19
Responding to Disputes
A collection agency that reports debts to a consumer reporting
agency is a “data furnisher.” It is extremely important that data
furnishers identify disputed debts and report the dispute to the
consumer reporting agency. This is why it is so important to
properly update the collection notes when a consumer verbally
disputes a debt. The Fair Credit Reporting Act, or FCRA, has
additional rules that data furnishers must follow for disputed
debts. The FCRA and section 807(8) of the FDCPA require data
furnishers to notify the consumer reporting agency that a debt is
disputed. Debt collectors must listen carefully when talking to a
right party in case he or she verbally disputes the debt. Debt
collectors will need to know how to update the account to make sure
the dispute is reported to the consumer reporting agency. It does
not matter if the debt collector disagrees with the consumer’s
dispute or thinks the dispute is not valid. Sending verification of
the debt does not eliminate the consumer’s dispute and that dispute
must be reported. The consumer may still dispute the debt even
after the documentation is provided.
A consumer can also dispute a debt that has been settled or paid in
full. The dispute must be documented in the collection notes. If
your agency is a data furnisher, the debt must be marked as
disputed with the consumer reporting agency. In addition to
violating the FCRA, a well known court decision held that it
violates the FDCPA when a data furnishing collection agency fails
to mark the debt as disputed on the consumer report.66
66 Brady v. Credit Recovery Co., Inc., 160 F.3d 64 (1st Cir.
1998).
©2011 ACA International. All Rights Reserved.20
Cease Communication
Cease Communication Requests § 805(c) [15 U.S.C. § 1692c(c)]
Consumers can stop debt collectors from communicating with them in
a number of ways.
Bankruptcy If a consumer files for bankruptcy, the Bankruptcy Code
imposes the “automatic stay” which requires all communications with
the consumer must stop as soon as the bankruptcy case is filed. If
the consumer tells a debt collector that he or she has filed for
bankruptcy, the debt collector may not demand payment. The only
information the debt collector can request is information about the
bankruptcy filing, including the attorney’s name, phone number and
address, the date the consumer filed for bankruptcy, the chapter of
bankruptcy that was filed and the case number. This information
must be documented in the collection notes and the account properly
coded so no phone calls will be placed and no collection notices
will be sent until the bankruptcy filing can be confirmed. Debt
collectors should ask if the consumer has an attorney and get the
attorney’s contact information. As discussed earlier, when the
consumer is represented by an attorney, the consumer is no longer a
“right party.” Debt collectors are not stopped from communicating
with the consumer if the consumer is merely thinking about filing
but has not yet filed for bankruptcy. Collection efforts must cease
immediately when a consumer files for bankruptcy, whether or not
the collection agency receives a written or verbal notice of the
filing.
Verbal A consumer might tell a debt collector to stop contacting
him or her during a collection call. This type of general request
to stop contact may not require a debt collector to stop all
communication. However, this verbal request may put the debt
collector on notice that the current time or place is inconvenient
for the consumer to receive collection calls.67 Such a response
from a consumer requires the collection notes be properly
documented and further calls at that time or place be ceased. The
consumer might not use the word “inconvenient” to describe the time
or place; however, verbal requests to limit inconvenient contacts
must be honored.
Place of Employment A debt collection phone call or letter to the
consumer’s place of employment also presents some concern. Some
consumers cannot receive calls at work. If a consumer tells a debt
collector he or she cannot take calls at work, this notice must be
honored. The work number must be removed from the collection notes
and the account updated the account to show that no contact is
allowed at the consumer’s place of employment. The consumer does
not have to put the request in writing. However, if a consumer asks
a debt collector not to call him or her at work, collection efforts
may continue by calling the consumer at home
67 15 U.S.C. § 1692c(a)(1) (§ 805(a)(1)).
©2011 ACA International. All Rights Reserved. 21
Cease Communication Requests
or another number. Examples of what a consumer could say include:
“You can’t call me at work;” “My boss doesn’t let me take personal
calls;” or “Don’t call me here anymore.” Such requests must be
honored.
Calls to a consumer’s workplace might also be inconvenient based on
the consumer’s type of work. Debt collectors should avoid calling a
consumer who works in a restaurant during “rush” or mealtimes,
avoid calling teachers during school hours, and avoid calling
construction workers off of a job site.
Written Some consumers will send a letter demanding that
communication regarding debt collection be stopped or limited in
some way. This type of letter is known as a cease communication
notice. The FDCPA states that any written request to stop or to
limit contact with a consumer must be obeyed.68 After receiving a
cease communication notice, a collection agency can contact the
consumer one time, but may not make a demand for payment. The
purpose of this final contact will be discussed later in this
section.
If the consumer sends a letter that does not specifically demand
that a debt collector stop contacting him or her but rather states
that he or she refuses to pay the debt, that notice must be treated
as a cease communication notice. Section 805(c) of the FDCPA
specifically references this situation. When a consumer puts in
writing that he or she refuses to pay the debt, debt collectors
cannot communicate further with the consumer.69 A consumer’s
refusal to pay might read something like: “You can keep trying, but
I’m not paying;” “You’re not getting a dime out of me;” “Rejected;”
or “I’m not paying this.” Debt collectors and administrative staff
who receive letters from consumers should read the letter carefully
to identify any contact limitations, refusals to pay, cease
communication notices, requests for verification of the debt or
other demands.
Final Communication After the consumer sends a written cease notice
or refuses to pay in writing, a collection agency may, but does not
have to, contact the consumer one more time but only for a very
specific reason. Some, but not all collection agencies, will take
this opportunity to notify the consumer what the agency or creditor
will do now that collection efforts have been stopped. However, the
final contact cannot demand payment. However, this final contact
can do one of three things: tell the consumer that further
communication will stop; tell the consumer what kind of action the
agency or the creditor usually take under similar circumstances; or
tell the consumer what the agency or the creditor intends to do
about the debt.70 Debt collectors should know their collection
agency’s policies and procedures for whether or not to make this
final contact and whether such final contact should be in writing
or on the phone. It is important that the information provided to
the consumer be true. The final contact with the consumer may NOT
demand payment.
68 15 U.S.C. § 1692c(c) (§ 805(c)). 69 15 U.S.C. § 1692c(c) (§
805(c)). 70 15 U.S.C. § 1692c (§ 805(c)).
©2011 ACA International. All Rights Reserved.22
What Can Go Wrong? What Can Go Wrong?
§ 813 [15 U.S.C. § 1692k] § 814 [15 U.S.C. § 1692l]
Collecting consumer debts also has some risks. One of those risks
is having a right party, third party or the creditor make a
complaint against the debt collector and/or the collection agency.
Complaints can take many forms and can come from many different
sources. The following information describes the types of
complaints and the consequences or potential consequences that can
arise from each type of complaint.
Creditor Complaints The creditor could complain about collection
activities either through its own investigation or based on
information received from a consumer. A complaint from the creditor
requires a serious and well thought out response. The creditor is
the agency’s client and if the client is not satisfied, the agency
may lose that creditor’s business. This is a substantial penalty
for the agency and it may reflect poorly on any debt collectors
involved or named in the complaint.
Better Business Bureau Every state has a watchdog organization
called the Better Business Bureau (“BBB”). The BBB accepts and
investigates complaints made by consumers or companies against
businesses. The Better Business Bureau does not have the authority
to impose fines or file charges; however, it is not a good idea to
ignore complaints from the BBB. Better Business Bureau complaints
against a debt collector or collection agency may reflect poorly on
both the collector and agency, particularly if there is no response
to the complaint. As creditors look for collection agencies to
hire, they will often review an agency’s history of complaints and
the resolution percentage with the Better Business Bureau. As with
a creditor complaint, it is important for the debt collector and
the collection agency to provide an accurate and well documented
response to all Better Business Bureau complaints.
Consumer Complaints & Pre-Litigation Demands A right party or
third party has the option to seek advice from an attorney
regarding alleged violations of the FDCPA. If an attorney gets
involved, the attorney may send a letter detailing the violation
and outlining a proposed settlement for the collection agency to
avoid a lawsuit. It is important for the collection agency to fully
investigate the alleged violation immediately after receiving the
demand letter from the attorney. It is also important for the debt
collector to cooperate with the collection agency in the
investigation. It is imperative for a debt collector to be honest
about what happened.
©2011 ACA International. All Rights Reserved. 23
What Can Go Wrong?
Lawsuits If the matter is not resolved, the attorney representing
the consumer may proceed with a lawsuit. If the court finds a
violation of the FDCPA, the person bringing the suit (the plaintiff
) can be awarded a significant amount of money.
Actual Damages One type of money damages the consumer can receive
is by having actual damages, which includes out-of-pocket expenses,
money damages for embarrassment, emotional distress, humiliation
and mental anguish.71 Courts have awarded actual damages ranging
from less than $65072 to more than $90,000.73 There are even a few
cases, based on a collector’s outrageous behavior, where the court
has awarded actual damages exceeding a million dollars. There is no
limit to the amount of actual damages a court can award under the
FDCPA.
Statutory Damages In addition to actual damages, a court may also
award statutory damages of up to $1,000.74 When deciding statutory
damages, courts consider how often the debt collector failed to
comply with the FDCPA (frequency), how inappropriate the conduct
was (nature of noncompliance or severity) and whether or not the
conduct was intentional (persistence).75 Just because a complaint
is filed does not mean the debt collector or the collection agency
did anything wrong. The consumer must prove the FDCPA was
violated.
Costs and Attorney's Fees The FDCPA also has a provision requiring
the debt collector or collection agency to pay the attorney’s fees
and other costs incurred by the plaintiff if the plaintiff wins the
lawsuit.76 This is in addition to having to pay an attorney to
defend the debt collector or collection agency. Defense fees add up
quickly and are only part of the cost equation. For example,
complaints and FDCPA violations may damage the agency’s reputation,
cause current clients to question whether or not they should
continue to do business with the agency and will most likely put
the agency at a disadvantage when bidding on new business.
Confirmed FDCPA violations might need to be reported to state
authorities, depending on individual state laws. If the violation
is serious enough, the agency could lose its collection license or
might be denied the opportunity to renew its collection agency
license in the future.
Class Action When there is a wide spread violation, an entire
group, or class, of individuals can come together in one lawsuit
against the debt collector and/or the collection agency. This is a
class action lawsuit. This is most common when there is an alleged
violation in a letter that was sent to a consumer. However, there
are instances where there is a pattern or practice of harassing and
abusive telephone collection techniques and a class of individuals
could file a class action lawsuit based on the abusive collection
calls, or based on excess unauthorized fees added to collection
accounts. Remedies available in an individual lawsuit versus a
class action lawsuit are different. In cases involving a class
action, each individual plaintiff named
71 15 U.S.C. § 1692k(a)(1) (§ 813(a)(1)). 72 Jones v. Vest, No.
00-CV-287, 2000 WL 33797103 (E.D. Va. Nov. 7, 2000). 73 Myers v.
LHR, Inc., 543 F. Supp. 2d 1215 (S.D. Cal. 2008). 74 15 U.S.C. §
1692k(a)(2) (§ 813(a)(2)). 75 15 U.S.C. § 1692k(b)(1) (§
813(b)(1)). 76 15 U.S.C. § 1692k(a)(3) (§ 813(a)(3)).
©2011 ACA International. All Rights Reserved.24
What Can Go Wrong?
in the lawsuit can be awarded up to $1,000.77 In addition, a court
can award $500,000 or one percent of the debt collector’s net worth
(whichever is less) to the class of individuals.78
State and Federal Authorities Complaints can also be filed with
State and Federal authorities, such as the Attorney General’s
office, the Federal Trade Commission or the Bureau of Consumer
Financial Protection.79 Based on the complaint, a State or Federal
authority could file suit for FDCPA or state law violations. In
these cases, the collection agency may have to pay the government’s
costs of investigation or to file suit.
If a creditor or a state or federal authority receives enough
complaints about a debt collector or collection agency, the state
or federal authority might launch a full investigation or a
comprehensive audit of all of the agency’s policies and procedures.
Investigations and audits are time consuming and very expensive. No
matter how the investigation or audit ends, the agency will have
high costs to defend the investigation and handle any public
relations costs to the collection agency’s reputation. Any type of
complaint must be taken it seriously, the claims investigated and a
response sent by the deadline. Failure to respond to complaints or
not addressing the issues that caused the complaint can result in
serious problems and financial hardship for both the collection
agency and the debt collector.
Individual Liability Individual debt collectors can be sued
personally for violations of the FDCPA.80 A consumer, third party,
or state or federal authority can file suit against a debt
collector personally for any improper actions. The debt collector
will have to defend him or herself and/or pay for an attorney to
assist in the defense. If a court finds a violation, the debt
collector will be responsible for the money damages detailed
earlier. In addition, the debt collector could lose his or her debt
collection license. This might affect whether or not the debt
collector can obtain a new license or whether or not a different
collection agency will hire the individual. Violating the FDCPA can
have a big impact on a debt collector’s future in the collection
industry.
77 15 U.S.C. § 1692k(a)(2)(B)(i) (§ 813(a)(2)(B)(i)). 78 15 U.S.C.
§ 1692k(a)(2)(B)(ii) (§ 813(a)(2)(B)(ii)). 79 15 U.S.C. § 1692l (§
814). The Bureau of Consumer Financial Protection is a federal
government agency created in 2010, which will have rulemaking and
enforcement authority under the Fair Debt Collection Practices Act.
80 15 U.S.C. § 1692k(a) (§ 813(a)).
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Appendix A: Text of the Fair Debt Collection Practices Act
Appendix A: Text of the Fair Debt Collection Practices Act § 801
Short title
§ 802 Congressional findings and declaration of purpose
§ 803 Definitions
§ 805 Communication in connection with debt collection
§ 806 Harassment or abuse
§ 808 Unfair practices
§ 812 Furnishing certain deceptive forms
§ 813 Civil liability
§ 814 Administrative enforcement
§ 815 Reports to Congress by the Commission; views of other Federal
agencies
§ 816 Relation to State laws
§ 817 Exemption for State regulation
§ 818 Exception for certain bad check enforcement programs operated
by private entities
§ 819 Effective Date
§ 801 . [15 U .S .C . § 1601] This title may be cited as the “Fair
Debt Collection Practices Act.”
§ 802 . Congressional findings and declaration of purpose [15 U .S
.C . § 1692] (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.
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Appendix A: Text of the Fair
Debt Collection Practices Act
(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.
(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.
§ 803 . Definitions [15 U .S .C . § 1692a] As used in this
subchapter—
(1) The term “Commission” means the Federal Trade Commission.
(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.
(5) The 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) The 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 [§ 808(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 affiliated and if the
principal business of such person is not the collection of
debts;
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Appendix A: Text of the Fair Debt Collection Practices Act
(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;
(E) any 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; and
(F) any 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)
concerns a debt obtained by such person as a secured party in a
commercial credit transaction involving the creditor.
(7) The term “location information” means a consumer’s place of
abode and his telephone number at such place, or his place of
employment.
(8) The term “State” means any State, territory, or possession of
the United States, the District of Columbia, the Commonwealth of
Puerto Rico, or any political subdivision of any of the
foregoing.
§ 804 . Acquisition of location information [15 U .S .C . § 1692b]
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) not 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) not 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 a
debt; and
(6) after 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.
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Appendix A: Text of the Fair
Debt Collection Practices Act
§ 805 . Communication in connection with debt collection [15 U .S
.C . § 1692c] (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) at 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) at 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.
(b) Communication with third parties Except as provided in section
1692b [§ 804] 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 postjudgment 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) where applicable, to notify the consumer that the debt
collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail, notification
shall be complete upon receipt.
(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.
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Appendix A: Text of the Fair Debt Collection Practices Act
§ 806 . Harassment or abuse [15 U .S .C . § 1692d] 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) The 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) The 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 [§ 603(f )] or 1681b [§
604(3)] of this title.
(4) The advertisement for sale of any debt to coerce payment of the
debt.
(5) Causing 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) Except as provided in section 1692b [§ 804] of this title, the
placement of telephone calls without meaningful disclosure of the
caller’s identity.
§ 807 . False or misleading representations [15 U .S .C . § 1692e]
A debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection of any
debt. Without limiting the general application of the foregoing,
the following conduct is a violation of this section:
(1) The false representation or implication that the debt collector
is vouched for, bonded by, or affiliated with the United States or
any State, including the use of any badge, uniform, or facsimile
thereof.
(2) The false representation of—
(A) the character, amount, or legal status of any debt; or
(B) any services rendered or compensation which may be lawfully
received by any debt collector for the collection of a debt.
(3) The false representation or implication that any individual is
an attorney or that any communication is from an attorney.
(4) The representation or implication that nonpayment of any debt
will result in the arrest or imprisonment of any person or the
seizure, garnishment, attachment, or sale of any property or wages
of any person unless such action is lawful and the debt collector
or creditor intends to take such action.
(5) The threat to take any action that cannot legally be taken or
that is not intended to be taken.
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Appendix A: Text of the Fair
Debt Collection Practices Act
(6) The false representation or implication that a sale, referral,
or other transfer of any interest in a debt shall cause the
consumer to—
(A) lose any claim or defense to payment of the debt; or
(B) become subject to any practice prohibited by this
subchapter.
(7) The false representation or implication that the consumer
committed any crime or other conduct in order to disgrace the
consumer.
(8) Communicating or threatening to communicate to any person
credit information which is known or which should be known to be
false, including the failure to communicate that a disputed debt is
disputed.
(9) The use or distribution of any written communication which
simulates or is falsely represented to be a document authorized,
issued, or approved by any court, official, or agency of the United
States or any State, or which creates a false impression as to its
source, authorization, or approval.
(10) The use of any false representation or deceptive means to
collect or attempt to collect any debt or to obtain information
concerning a consumer.
(11) The failure to disclose in the initial written communication
with the consumer and, in addition, if the initial communication
with the consumer is oral, in that initial oral communication, that
the debt collector is attempting to collect a debt and that any
information obtained will be used for that purpose, and the failure
to disclose in subsequent communications that the communication is
from a debt collector, except that this paragraph shall not apply
to a formal pleading made in connection with a legal action.
(12) The false representation or implication that accounts have
been turned over to innocent purchasers for value.
(13) The false representation or implication that documents are
legal process.
(14) The use of any business, company, or organization name other
than the true name of the debt collector’s business, company, or
organization.
(15) The false representation or implication that documents are not
legal process forms or do not require action by the consumer.
(16) The false representation or implication that a debt collector
operates or is employed by a consumer reporting agency as defined
by section 1681a [§ 603(f )] of this title.
§ 808 . Unfair practices [15 U .S .C . § 1692f] A debt collector
may not use unfair or unconscionable means to collect or attempt to
collect any debt. Without limiting the general application of the
foregoing, the following conduct is a violation of this
section:
©2011 ACA International. All Rights Reserved. 31
Appendix A: Text of the Fair Debt Collection Practices Act
(1) The collection of any amount (including any interest, fee,
charge, or expense incidental to the principal obligation) unless
such amount is expressly authorized by the agreement creating the
debt or permitted by law.
(2) The acceptance by a debt collector from any person of a check
or other payment instrument postdated by more than five days unless
such person is notified in writing of the debt collector’s intent
to deposit such check or instrument not more than ten nor less than
three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated check or
other postdated payment instrument for the purpose of threatening
or instituting criminal prosecution.
(4) Depositing or threatening to deposit any postdated check or
other postdated payment instrument prior to the date on such check
or instrument.
(5) Causing charges to be made to any person for communications by
concealment of the true purpose of the communication. Such charges
include, but are not limited to, collect telephone calls and
telegram fees.
(6) Taking or threatening to take any nonjudicial action to effect
dispossession or disablement of property if—
(A) there is no present right to possession of the property claimed
as collateral through an enforceable security interest;
(B) there is no present intention to take possession of the
property; or
(C) the property is exempt by law from such dispossession or
disablement.
(7) Communicating with a consumer regarding a debt by post
card.
(8) Using any language or symbol, other than the debt collector’s
address, on any envelope when communicating with a consumer by use
of the mails or by telegram, except that a debt collector may use
his business name if such name does not indicate that he is in the
debt collection business.
§ 809 . Validation of debts [15 U .S .C . § 1692g] (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;
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Appendix A: Text of the Fair
Debt Collection Practices Act
(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.
(b) Disputed debts If the consumer notifies the debt collector in
writing within the thirty-day period described in subsection (a) of
this section that the debt, or any portion thereof, is disputed, or
that the consumer requests the name and address of the original
creditor, the debt collector shall cease collection of the debt, or
any disputed portion thereof, until the debt collector obtains
verification of the debt or a copy of a judgment, or the name and
address of the original creditor, and a copy of such verification
or judgment, or name and address of the original creditor, is
mailed to the consumer by the debt collector. Collection activities
and communications that do not otherwise violate this title may
continue during the 30-day period referred to in subsection (a)
unless the consumer has notified the debt collector in writing that
the debt, or any portion of the debt, is disputed or that the
consumer requests the name and address of the original creditor.
Any collection activities and communication during the 30-day
period may not overshadow or be inconsistent with the disclosure of