The FDCPA applies to debt collectors who use interstate commerce, including the regular mail to collect debts. The federal law applies to the collection agency and not the original creditors. Creditors normally try to collect from the debtor first. If the creditor can’t reach satisfactory terms with the debtor, then the creditor will assign or sell the claim to a collection agency. As with most laws, the FDCPA has exceptions that a consumer lawyer should know.
The FDCPA law applies to family and consumer debts. It doesn’t apply to business debts. This can sometimes get complicated when a business owner personally agrees to pay if a business loan goes into default.
The Act prohibits some acts by the debt collector and requires certain acts as to be performed as well. Debt collectors who fail to comply with the terms of the act may be liable in court for their misconduct.
The FDCPA prohibits conduct which is either abusive, deceptive or both. At the core of the Act, the debt collector is supposed to treat the debtor quite fairly and honestly. These are just some of the acts that FDCPA does not allow:
Debt collectors must cease all communication with the debtor if the debtor sends a written notice that they refuse to pay the claimed debt or that they don’t wish to respond to any further communications. Debtors should know, and the debt collector does have the right to inform the debtor, if the debtor does not work with the debt collector, that the creditor or debt collector may start formal legal action to try to collect the debt or get a judgment against the debtor.
Debtors, who want the phone calls to cease (with the attendant risk of a lawsuit) should inform the debt collector in writing by certified mail and return receipt requested, to make sure they have proof that the debt collector was informed.
Telephone calls can’t be for the purpose of harassing the debtor. Repeated phone calls, even during the daylight hours, may be a sign of harassment. The debtor collector also has to deal with the debtor in a civil manner. The debt collector cannot at all be or come across as abusive.
Collectors may call the debtor at work but if the debtor tells the debt collector that calls are not allowed at work or that the employer doesn’t permit discussing personal matter on business time, then the debt collector must stop making calls to work at once and try to reach the debtor at home during the set out hours within the Act.
If the debtor or consumer tells the collector that he/she has a FDCPA attorney (see FAQ), then the debt collector must communicate directly with the lawyer and stop all calls to the debtor. The debtor hires an attorney for the peace of mind of having the consumer lawyer handle the debtor’s financial matters for a fee.
Collectors can speak with the debtor or communicate with him/her if the debtor asks for validation of the debt. Debtors have the right to ask for validation of the debt (usually the name and address of the original creditor plus the amount of the debt) within a 30 day validation period. The debt collector must provide the validation. Only after validation is sent, can the debt collector resume communications.
Debt collectors can’t make misrepresentations or use deception to try to collect the debt. This includes saying that they are lawyer or a law enforcement officer. Debt collectors can only ask for what’s allowed under the law and no more.
Collectors can’t threaten arrest and they can’t threaten legal action if legal action is not being actively contemplated.
Debt collectors can’t publish the consumer’s name or address on what’s known as a “bad debt” list. They also can’t communicate in a way that would make the debt public such as using a post card which could be read by anyone. Mail should just have the collectors’ address. The business name can be included if it doesn’t indicate that the business is a collector.
Debt collectors can’t review a debtor’s claims with third parties (lawyers and spouse are excepted). The collector can contact neighbors and co-workers but just to get information on the debtor’s whereabouts not the underlying debt.
Debt collectors can’t report false information (or threaten to do so) to the credit reporting agencies.
The FDCPA does require that debt collectors do the following:
Identify who they are: The debt collector must state who they are, that they are a debt collector and that the information collected is being used to collect a debt
They must provide an initial notice that the debtor has 30 days upon receipt of the notice to demand verification of the debt. The request for verification must be in writing.
If the debtor requests verification, then the debt collector must stop collection activities or provide the verification. Verification includes the name and address of the creditor and the amount of the debt that is owed. Disputes must be reported to credit bureaus that report the date.
Debt collectors can only file a lawsuit in a proper venue – where the debtor lives or where the original contract for the underlying debt was made unless the debtor moves to another state.
The Federal Trade Commission can enforce the terms of the Fair Debt Credit Practices Act.
Individuals can also bring their own private lawsuit asking for actual damages, statutory damages, legal fees and court costs. Debtors don’t need to prove actual damages. If there’s a violation, then statutory damages up to $1,000 plus legal fees and costs can be awarded if the debtor can show the individual violated the law.
Debt collectors can try to argue that the violations was not intentional and the result of a bona fide error. Collectors can even get bad faith damages if the debtor filed the claim for purposes of harassment.