Fair Debt Collections Act of 1978

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Fair Debt Collection Practices Act

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The Fair Debt Collection Practices Act (or FDCPA), 15 U.S.C. § 1692 et seq., is a United States statute added in 1978 as Title VIII of the Consumer Credit Protection Act. Its purposes are to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy. The Act creates guidelines under which debt collectors may conduct business, defines rights of consumers involved with debt collectors, and prescribes penalties and remedies for violations of the Act. It is sometimes used in conjunction with the Fair Credit Reporting Act.



[edit] People and entities covered by the FDCPA

In the United States, debt collectors may use different names such as "collection agency," "factoring company" or some other name that may or may not be understood by a consumer to be a third-party collector (and that might be used to claim immunity from the Act). However, the FDCPA broadly defines debt collectors as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." [1] While the FDCPA generally only applies to third party debt collectors--not internal collectors for an "original creditor" -- some states, such as California, have similar state consumer protection laws which mirror the FDCPA, and regulate original creditors. In addition, courts have generally found debt buyers to be covered by the FDCPA even though they are collecting their own debts. The definitions and coverage have changed over time. The FDCPA itself contains numerous exceptions to the definition of a "debt collector," particularly after the October 13, 2006, passage of the Financial Services Regulatory Relief Act of 2006. Attorneys, originally explicitly excepted from the definition of a debt collector, have been included (to the extent that they otherwise meet the definition) since 1986.

The FDCPA's definitions of "consumers" and "debt" specifically restricts the coverage of the act to personal and non-commercial transactions.[clarify] Thus, debts owed by businesses are not regulated.

[edit] Prohibited conduct

The Act prohibits certain types of "abusive and deceptive" conduct when attempting to collect debts, including the following:

  • Hours for phone contact: contacting consumers by telephone outside of the hours of 8:00 a.m. to 9:00 p.m. local time[2]
  • Contact after being asked to stop: contacting consumers in any way (other than litigation) after receiving written notice that said consumer wishes no further contact or refuses to pay the alleged debt, with certain exceptions, including advising that collection efforts are being terminated or that the collector intends to file a lawsuit or pursue other remedies where permitted[3]
  • Contacting consumers at their place of employment after having been told verbally or in writing that this is not acceptable[4]
  • Contacting consumer known to be represented by an attorney[5]
  • Contacting consumer after request for validation: contacting the consumer or the pursuing collection efforts by the debt collector after receipt of a consumer's written request for verification of a debt (or for the name and address of the original creditor on a debt) and before the debt collector mails the consumer the requested verification or original creditor's name and address[6]
  • Misrepresentation or deceit: misrepresenting the debt or using deception to collect the debt, including a debt collector's misrepresentation that he or she is an attorney or law enforcement officer[7]
  • Publishing the consumer's name or address on a "bad debt" list[8]
  • Seeking unjustified amounts, which would include demanding any amounts not permitted under an applicable contract or as provided under applicable law[9]
  • Threatening arrest or legal action that is either not permitted or not actually contemplated[10]
  • Abusive or profane language used in the course of communication related to the debt[11]
  • Contact with third parties: revealing or discussing the nature of debts with third parties (other than the consumer's spouse or attorney) or threatening such action[12]
  • Contact by embarrassing media, such as communicating with the consumer by post card or using letterhead that makes it clear that the communication is from a debt collector[13]
  • Reporting false information on a consumer's credit report or threatening to do so in the process of collection[14]

[edit] Required conduct

Further, the FDCPA requires debt collectors to:

  • Identify themselves and notify the consumer, in every communication, that the communication is from a debt collector, and that information received will be used to effect collection of the debt[15]
  • Give the name and address of the original creditor (company to which the debt was originally payable) upon the consumer's written request made within 30 days of receipt of the §1692g validation notice;[16]
  • Notify the consumer of their right to dispute the debt, in part or in full, with the debt collector. This so-called 30-day "§1692g" validation notice is required to be sent by debt collectors within five days of the initial communication with the consumer, though in 2006 the definition of "initial communication" was amended to exclude "a formal pleading in a civil action" for purposes of triggering the §1692g validation notice, [17] complicating the matter where the debt collector is an attorney or law firm. The consumer's receipt of this notice starts the clock running on the 30-day right to demand validation of the debt from the debt collector. [18]
  • Provide verification of the debt If a consumer sends a written dispute or request for verification within 30 days of receiving the §1692g validation notice, then the debt collector must either mail the consumer the requested validation information or cease collection efforts altogether. Such asserted disputes must also be reported by the creditor to any credit bureau that reports the debt. Consumers may still dispute a debt verbally or after the thirty-day period has elapsed, but doing so waives the right to compel the debt collector to produce verification of the debt. It is unclear what is required of such written verifications.[19]
  • File a lawsuit in a proper venue - a debt collector may file a lawsuit, if at all, only in a place where the consumer lives or signed the contract[20]

This should not be understood to be an exhaustive list either of prohibited or required conduct.

[edit] Enforcement of the FDCPA

The Federal Trade Commission has the authority to administratively enforce the FDCPA using its powers under the Federal Trade Commission Act.[21]

Aggrieved consumers may also file a private lawsuit in a State or Federal court to collect damages (actual, statutory, attorney's fee and court-costs) from third-party debt collectors. The FDCPA is a strict liability law, which means that a consumer need not prove actual damages in order to claim statutory damages of up to $1,000 plus reasonable attorney fees if a debt collector is proven to have violated the FDCPA.[22] The collector may, however, escape penalty if it shows that the violation (or violations) was the result of a "bona fide error."[23]

Alternately, if the consumer loses the lawsuit and the court determines that the consumer filed the case in bad faith and for the purposes of harassment, the court may then award attorney's fees to the debt collector. Historically, courts have only very rarely ordered consumers to pay debt collectors' attorney fees in a FDCPA case.

[edit] Criticisms of the FDCPA

[edit] By consumer groups

Some consumer groups argue that the FDCPA does not go far enough, and does not provide sufficient deterrence against unscrupulous collection agencies. Consumer groups have complained that the maximum statutory damages contained in the original 1978 version of the law has not kept up with inflation. According to the inflation calculator at the Bureau of Labor Statistics' website, that same penalty would be the equivalent of $3,105.83 by 2006 standards. The Washington, D.C.-based National Association of Consumer Advocates is the largest consumer advocacy organization in the United States. Its member attorneys bring thousands of such FDCPA suits each year in virtually all 50 states.[citation needed]

Many debt collectors, and the consumer rights attorneys who sue them for violations of the FDCPA rely heavily on the definitive legal treatise on the FDCPA produced by the National Consumer Law Center.

[edit] By the credit industry

Conversely, many in the credit industry and some courts have taken the stance that the FDCPA has often been used to file frivolous lawsuits and seek damages for minor technical violations and has, at times, seriously impeded their ability to collect valid debts.[24] Given the strict liability nature of the FDCPA, the collections industry and the insurance companies who provide liability coverage for them have repeatedly lobbied Congress to relax provisions of the law to reduce their civil exposure for these "hyper-technical" violations. [25]

A scenario created by the FDCPA as follows:

It is interesting to contemplate the genesis of these suits. The hypothetical Mr. Least Sophisticated Consumer ("LSC") makes a $ 400 purchase. His debt remains unpaid and undisputed. He eventually receives a collection letter requesting payment of the debt which he rightfully owes. Mr. LSC, upon receiving a debt collection letter that contains some minute variation from the statute's requirements, immediately exclaims "This clearly runs afoul of the FDCPA!" and -- rather than simply pay what he owes -- repairs to his lawyer's office to vindicate a perceived "wrong." "[T]here comes a point where this Court should not be ignorant as judges of what we know as men."[26]

The debt collection industry is supported by an industry trade group based in Minneapolis, Minnesota, called ACA International. The ACA produces a variety of legal compliance materials for debt collectors and serves as an industry lobbyist. The ACA seeks legal and interpretive changes that will assist its members in the collection of debts for their clients. The ACA is also involved in a variety of public relations activities related to the collection industry.

[edit] The FTC Report

For its part, the Federal Trade Commission (FTC) produces an annual report to Congress of its findings with respect to its FDCPA enforcement activities. This report details consumer complaints to the FTC about alleged debt collector violations of the FDCPA. There were more than 69,000 consumer complaints made to the FTC about debt collectors in 2006, which is more complaints than the FTC receives about any other specific industry. This was an overall increase of 3.8% over 2005.[27]

[edit] References

  1. ^ 15 U.S.C. § 1692a
  2. ^ 15 U.S.C. § 1692c(a)(1)
  3. ^ 15 U.S.C. § 1692c(c)
  4. ^ 15 U.S.C. § 1692c(a)(3)
  5. ^ 15 U.S.C. § 1692c(a)(2)
  6. ^ 15 U.S.C. § 1692g(b)
  7. ^ 15 U.S.C. § 1692e
  8. ^ 15 U.S.C. § 1692(d)
  9. ^ 15 U.S.C. § 1692f(1); Hodges v. Sasil Corp., 915 A.2d 1 (N.J. 2007)
  10. ^ 15 U.S.C. § 1692e
  11. ^ 15 U.S.C. § 1692d
  12. ^ 15 U.S.C. § 1692d and 15 U.S.C. § 1692e
  13. ^ 15 U.S.C. § 1692f(8)
  14. ^ 15 U.S.C. § 1692e(8)
  15. ^ 15 U.S.C. § 1692e(11)
  16. ^ 15 U.S.C. § 1692g(b)
  17. ^ 15 U.S.C. § 1692g(d)
  18. ^ 15 U.S.C. § 1692g(b)
  19. ^ 15 U.S.C. § 1692g(b)
  20. ^ 15 U.S.C. § 1692i
  21. ^ 15 U.S.C. § 1692l
  22. ^ 15 U.S.C. § 1692k(a)(2)
  23. ^ 15 U.S.C. § 1692k(c)
  24. ^ Rubinstein, Kenneth (July 20, 2007). "Courts, Congress send mixed messages to debt collectors". New Hampshire Business Review. Retrieved on 2007-08-23.; O'Connor v. Check Rite, Ltd., 973 F. Supp. 1010 (D.Colo. 1997) (awarding plaintiff statutory damages of only $0.01, and then finding plaintiff liable for a defendant’s attorneys’ fees and costs because of the plaintiff’s lack of discretion in filing the action).
  25. ^ Bailey v. Security Nat. Servicing Corp., 154 F.3d 384 (C.A.7 (Ill.), 1998); Carroll v. Wolpoff & Abramson, 53 F.3d 626 (C.A.4 (Md.), 1995)
  26. ^ Jacobson v. Healthcare Fin. Servs., 434 F. Supp. 2d 133, 138-139 (D.N.Y. 2006)(quoting Watts v. State of Ind., 338 U.S. 49, 52, 69 S.Ct. 1347, 1349, 93 L. Ed. 1801 (U.S. 1949))
  27. ^ Federal Trade Commission Annual Report 2007; Fair Debt Collection Practices Act. Federal Trade Commission. Retrieved on 2007-08-24.

[edit] External links

Note: Check to be sure you are looking at the current version of the Act. It was most recently amended in 2006. See Public Citizen.