LAWDOG Fair Debt Collection Practices Act

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Primarily For Personal, Family or Household Purposes

Under the Fair Debt Collection Practices Act, the "debt" is defined as an obligation of a "consumer" to pay money arising out of a transaction in which the money, property, insurance, or service that was the subject of the transaction was used primarily for personal, family or household purposes. A business debt may not be covered by the Fair Debt Collection Practices Act, but deciding whether a debt is primarily for personal, family or household purposes may raise serious questions.

The Fair Debt Collection Practices Act protects the "consumer," defined as any natural person obligated to pay any debt, but not a corporation or partnership. In protecting the "consumer," the Act extends a broad range of protection. A communication from a collector which could be misleading or deceptive to the "least sophisticated person" probably violates the Fair Debt Collection Practices Act.

The Federal Fair Debt Collection Practices Act generally applies to personal, family, and household debts, including but not limited to personal auto loans or charge accounts, or bills for medical treatment. "Debt collectors" are prohibited from engaging in unfair, deceptive, or abusive practices while collecting debts of these types.

Debt Collectors

The Fair Debt Collection Practices Act was enacted to eliminate abusive, deceptive and unfair collection practices by "debt collectors" and to protect consumers from these practices. Under the Fair Debt Collection Practices Act, a "debt collector" is any person whose business uses interstate commerce or mail to collect any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owing or due to another person. Therefore a creditor may be permitted to collect its own debt and not be subject to regulation by the Fair Debt Collection Practices Act, provided that the creditor does not use another name which would indicate to the debtor that another person is collecting the debt. However, state laws may apply similar requirements to creditors as well. There are several exclusions from the definition, each of these exceptions requires interpretation and application to the particular facts.

Mini-Miranda Requirement

The Fair Debt Collection Practices Act provides that a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of debt. Section 807 of the Fair Debt Collection Practices Act provides that "false, deceptive, or misleading representation" includes the failure to disclose in the initial oral or written communication with the consumer 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". This is referred to as the "mini-Miranda" requirement, as modified effective December 30, 1996. See "Failure To Give proper Initial Disclosure" by clicking here. Link does not return to this page.

Initial Notice & Verification

In addition to the "mini-Miranda" requirements, within five days after first contact, the debt collector must send a written notice advising the consumer of the amount of money owed; the name of the creditor to whom the money is owed; and the actions which the consumer may take if the consumer believes that he, or she, does not owe the money. This includes a statement that if the consumer notifies the debt collector in writing within thirty days after receipt of the notice, 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. See "Summary of Notice & Verification" by clicking here. Link does not return to this page.

Disputed Debts

A collector may not contact the consumer if, within thirty days after the notice described above, the consumer sends the collection agency a letter disputing the debt. However, the collector may renew collection activities if proof of the debt, such as a copy of billing statements for the amount owed is supplied to the consumer. See "When Consumer Disputes In Writing" by clicking here. Link does not return to this page.

Ceasing Communications

When the debt collector receives a letter from the advising the collector to cease contact, they may not contact the consumer again, except to say there will be no further contact. The agency may notify the consumer if the debt collector or the creditor intends to take some specific action. See "Communications Must Cease" by clicking here. Link does not return to this page.

"Skip Tracing"

If the consumer has an attorney, the debt collector may not contact anyone other than the attorney (with some restrictions. Click here to see "If consumer is represented by an attorney". Link does not return to this page). If the consumer does not have an attorney, a collector may contact other people, but only to find out where the consumer lives and works. Collectors may be prohibited from contacting such permissible third parties more than once. See "Locating Consumers" by clicking here. Link does not return to this page. In most cases, the collector may not tell anyone other than the consumer and the attorney that the consumer owes money.

Communications With Consumer

Among other requirements, the Fair Debt Collection Practices Act forbids debt collectors from communicating with any person other than the consumer’s attorney if he or she knows the consumer is represented by an attorney (with some restrictions. Click here to see "If consumer is represented by an attorney". Link does not return to this page). "Debt collectors" must generally only make contact with consumers only between 8 a.m. and 9 p.m, and may be restricted in contacts with consumers at their place of employment. See "Communications With Consumer" by clicking here. Link does not return to this page.

Harassment

Debt collectors may not harass, oppress, or abuse consumers. Illustrations include publishing a list of consumers who refuse to pay debts, the use threats of violence or harm against the person, property, or reputation, the use obscene or profane language, telephoning without identification, repeated use of the telephone to annoy, and advertisement of debt. See "Harassment" by clicking here. Link does not return to this page.

False Representations

Debt collectors may not tell consumers that they will be arrested if they do not pay debt, that the collector will seize, garnish, attach, or sell property or wages, unless the collection agency or creditor intends to do, and has a legal right to do these things. Collectors may not threaten that actions, such as lawsuits, will be taken, which legally may not be taken, or which they do not intend to take.

Debt collectors further may not use any false statements when collecting a debt. Illustrations include falsely implying that they are attorneys or government representatives, falsely representing that they operate or work for a credit reporting agency, falsely implying that the consumer has committed a crime, misrepresenting the amount of a debt, misrepresenting the involvement of an attorney in collection of a debt, indicating that documents are legal forms when they are not, or indicating that documents are not legal forms when they in fact are legal forms. See "Misrepresentations By Debt Collectors" by clicking here. Link does not return to this page.

Unfair Practices

Debt collectors may not engage in unfair practices in the collection of a debt. Illustrations include the collection of an amount greater than the debt, unless allowed by law, making consumers accept collect calls or pay for telegrams, the premature deposit of post-dated checks, repossessing or threatening to repossess property (unless these acts or threatened acts are legal under state law), and contacting consumers by postcard. See "Unfair Practices By Debt Collectors" by clicking here. Link does not return to this page.

Enforcement & Liability

The Act, which has application nationwide, is enforced primarily by the Federal Trade Commission. In addition, a "debt collector" in a particular state may be required to comply with separate state laws. Although violations of the Act can cause enforcement action by the Federal Trade Commission, violations more importantly may subject the violator to civil liability equal to the actual damages suffered by the consumer, plus additional damages of up to $1,000 per violation, and the consumer’s legal fees and costs. In a class action, additional damages of $1,000 per violation for each named plaintiff, and an additional amount for the remaining members of the class up to the lesser of $500,000 or 1 percent of the debt collector’s net worth may be ordered.

The debt collector has a statutory defense against civil liability by demonstrating by a preponderance of the evidence "that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error." See "Enforcement & Liability" by clicking here. Link does not return to this page.

State Laws May Be More Restrictive And May apply To Creditors

While this summary illustrates some important requirements for debt collectors in dealing with consumers, it is not intended to be an exhaustive list of all requirements. In addition to other provisions in the Fair Debt Collection Practices Act, other Federal or state laws may apply to the same actions by debt collectors. Actual cases should be discussed with your actual legal advisor or legal department.

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