What is the Fair Debt Collection Practices Act – FDCPA?
The calls come in round the clock, and each time, it’s a threatening voice over the phone with an intimidating message. Your credit card debt is overdue and unless you pay up an arrest was probable.
Such calls aren’t just frightening; they go against the law, however, debt collection agencies contact customers like that all the time.
This is the very reason Congress brought about the Federal Fair Debt Collection Practices Act (FFDCPA).
This is a 1997 federal law which restricts certain actions and behavior of third-party debt collectors.
It prohibits them from threatening, harassing and inappropriately contacting an entity or individual that owes them or their client’s money.
The law seeks to restrain the methods and means by which debt collectors can get in touch with debtors. Furthermore, it restricts the number of times and time of day contact can be made.
In situations where this law is violated or broken, a suit can be carried out against the particular debt collector as well as the debt collection company.
This can be done within a year in order to collect attorney fees and damages.
A recent 2017 survey conducted by Ernest and Young stated that debt collection organization’s earned 10.9 billion dollars on collected 78.5 billion dollars overdue debts.
With health-care related debts collected the highest, at 47%, credit card debt below 10% and student loans at 21%.
As a matter of fact, student loans default has been on the rise as a recent government survey states.
In addition to that, the Federal Consumer Financial Protection Bureau (CFPB) says that approximately 77 million adults in the United States, which adds up to 35% of the total adult population, have had to be subject to debt collection at some point.
Now, as debtors are unable to pay back their loans, the efforts by collectors increase. This sees debt collection organization’s boom in growth, which results in the rise of customer complaints.
These complaints do not fall on deaf ears, as the CFBC in 2015 sent back $360 million to customers due to unlawful enforcement actions in the collection of debts.
Asides from this over $79 million were collected in fines for such actions.
It’s important to state though that despite the clarity of the law, numerous collectors try to game the system and this is what results in consumer complaints.
Hence, the FTC via the FDCPA blocks debt collection organizations from utilizing deceptive, threatening, unfair practices to force consumers to pay their debts.
THIRD-PARTY AND IN-HOUSE DEBT COLLECTORS – WHERE THE LAW APPLIES
Debt collects most times do not represent the bank, company or credit card issuer that gave you a loan.
Some of them do act as representatives of the lender or a bank, however, some others purchase your debt as soon as the lender ceased trying to get you to pay.
In the two scenarios they have the full rights to collect what is owed, nevertheless, the FTC rules and regulations must be adhered too when seeking payment.
However, in-house collectors are not subject to the law. In-house collectors are departments or branches of the agency that loaned you the money.
Banks, for example, use these types of collectors to collect payments in the early stages of the loan.
If after 6 months the loan isn’t repaid then they end up turning to debt collection agencies who most times buy off your loan and then seek to collect it from you themselves.
At other times they simply seek to collect the cash on the original lender’s behalf.
These outside collectors are the ones under the FDCPA debt collection rules.
Also, the FDCPA law covers family, household, and personal debts inclusive of medical bills, home/auto loans, and retail refinancing.
This is necessary as personal debts are the major recipients of collector agents
For example, 52% of the total collection accounts in the United States are medical. Which are approximately 43 million consumers who have one or more medical debts in collection.
WHAT IS ALLOWED AND WHAT ISN’T?
As a borrower, you are obligated to pay up your debts. If you need help, nonprofit debt counselors are available to guide you in reaching a workable payment plan.
Nevertheless, delinquent debtors under all circumstances are to be treated respectfully and also accorded privacy. A debt collector is not permitted to threaten you, use abusive language on you or claim he/she can get you arrested.
What’s more, if you are not allowed to receive calls in your workplace, the debt collector is not permitted or calls you at work, or at any time between 9 pm and 8 am.
Your privacy must be fully respected and no one who is not permitted to know by law should be informed of your payment default by the collector.
There are also other forms of protection the law offers debtors from dubious debt collectors:
Consumers have the right to see evidence of the debt they owe. Debt collectors must possess a document which shows the payment default. This can be an unpaid bill or any other form of proof.
Debt collectors are prohibited from abusing, threatening, harassing or abusing debtors. They may not call the borrower simply to annoy him/her or to intimidate them.
Also when speaking to a debtor, it must be done professionally without profane or derogatory words.
Collectors are not permitted to call the borrowers friends, family, church members, neighbors, coworkers or anyone else for the purpose of informing them of the debtor’s debt.
However, in a situation, where as a debtor, you change your phone number or address, they can do so in order to get your new number and be able to reach you.
They are also restricted from releasing a list of defaulting consumers to the public. In cases where these rules are violated the consumer can send a desist letter to the debt collector stating that such actions are opposed to the federal law.
Collectors are prohibited from spreading misinformation in order to collect debts. For example, when a collection agency falsely identifies themselves as a government agency or an individual collector claims to be an attorney.
When they do such, they usually threaten you with jail, stating you’ve committed a crime and could face jail time.
4. False Identification
Collectors cannot fake their identity. Numerous defaulting borrowers have complained about collectors who pose as attorneys or law enforcement agents and try to scare them into paying.
This is absolutely illegal. Impersonating an officer of the law is a serious offense as well as prohibited in debt collection. They cannot threaten you with steps they are not capable of taking without a court order.
For example, a collector can not threaten to seize your property without a court order except it is collateral. In addition, threatening to sue you after the deadline for legal actions is passed is illegal.
5. Undue Collection
Debt collectors may not take part in unfair debt collection methods by trying to take more than the customer owes or that the state law permits. In case you give a collector a post-dated check, they are not permitted to deposit the check before time.
Collectors are not permitted to threaten to take your property unless they’re able to get it done legally, and they are prohibited from contacting you through a postcard.
6. Inappropriate Threats
Threatening consumers with illegal actions is strictly prohibited. Collectors are not allowed to threaten you with legal actions they are incapable of taking on their own. Also, they can’t threaten you with futuristic legal plans they plan to pursue.
7. Wage Deduction Without Court Order
Wage deduction directs an employer or bank to turn over wages or funds as a method of paying the consumers debt. However, debt collectors have no legal right to do such except with a court order.
Even with a court order, certain federal benefits are excluded from garnishing including military annuities, social security, and student assistance.
8. False Information
Collectors aren’t permitted to give you false information in order to trick you. For example, they cannot send you any document that looks just like a government or court document.
Also, they cannot trick you into thinking the legal forms they send you are regular forms.
9. Your Right to Sue
If a debt collector goes against for law, as a consumer you can sue them either through class action or individually.
Lenders seek their money back and most times turn to outside collection agencies to mount pressure on delinquent borrowers.
Remember that FDCPA rules are only applicable to debt collectors who purchased your debt from the original lender.
A collector could be an attorney, collection agencies or organizations that purchase defaulting debts from lenders in order to collect.
DEBT COLLECTOR CONTACT RULES
You are within your legal rights to notify debt collectors to desist from contacting you.
However, even though it may take the pressure off your daily life, it certainly isn’t the best solution for a consumer.
Creditors are also still within their rights to sue you for defaulting on the loan. They are also allowed to contact you in order to let you know that a lawsuit is on its way.
As we’ve already seen debt collectors can only contact you between 8 am to 9 pm. They are not permitted to put a call across to you when you’re at work if your workplace does not permit phone calls.
However, if you want to end the phone calls altogether, you have to send the collection organization a cease-and-desist letter.
Keep in mind that it’s best practice to send the letter through a certified mail. The mail should also possess a verification request that it was received.
So basically, if you get a lawyer, he/she will provide the collection organization with a cease-and-desist letter. From then on the collector has to contact the attorney and not you.
In a situation where you do not have access to a lawyer, then the debt collectors can contact other individuals who know you but only to get your phone number and find either your home or work address.
Regardless though of their right to do this, collection agencies can only contact a third-party once. Furthermore, when speaking to the third-party, they are not permitted to bring up your debt in the conversation.
Only to your lawyer and spouse can your debt be part of the conversation.
PROOF OF DEBT
Based on the rules and regulations of the FDCPA, debt collectors are meant to provide you with the details of all debts they seek to collect from you via a written notice which contains the following:
- Name of creditor
- Amount owed
- Detailed instructions on how the debt must be repaid.
This is termed as the validation notice and it must be delivered to the defaulting consumer within 5 days of the first contact. When this is done you have 30 days to get across to the debt collector.
You have to get across to the collector by letter and state the reasons why the amount presented to you as debt is false or why you do not owe the lender anything.
If for example as a debtor you owe money to different creditors or numerous debts to a particular creditor, it can become very confusing as to what debt the collector is demanding.
Hence you must demand that the debt collector be crystal clear as to where the specific debt he is demanding for originates from and the amount owed.
In addition, if the debt collector debt demands are proven to be yours but you’ve already paid it, make sure you include a copy of your bank statement or canceled check.
i) What to do when you do not agree to amount owed?
If you do not agree with the amount of the debt stated, the verification must indicate details about payments you’ve made, fees waived or charged and interest.
ii) What to do when the debt is due to identity theft?
When you are certain that the debt is as a result of identity theft you must put in a copy of the police report relating to identifying theft.
It’s vital to state that this must be done within 30 days. The 30 days window is the validation period, after this, your debt will be assumed to be legitimate.
Now after receiving your letter, collectors are not permitted to renew attempts to get the debt paid until it is verified and detailed proof of its legitimacy is delivered to you.
The verification letter must include:
- The debt amount
- The specific date when it was incurred
- The address and name of the original lender if it varies from the present one.
- Proof that your debt has been purchased or sold to the collection agency.
In situations where the required information is not being presented, every collection attempt must immediately stop.
RULES FOR IN-HOUSE COLLECTORS
The FDCPA rules and regulations possesses a loophole for in-house collections.
Basically, in-house collectors are a department or brand of a retailer, credit-card organization or bank that initially offered you the credit line or loan.
In the initial stages of a loan default, lenders try to get the loan back themselves via their in-house collection agencies. These collectors are exempt from federal law which prohibits unfair and abusive practices against consumers.
Lawmakers allowed this believing that in-house collectors won’t be as hard on their own customers as outsider debt collectors would be. However, the federal trade commission records numerous complaints against in-house collectors as well.
FILING A COMPLAINT
In cases where a debt collector has not followed the FDCPA law appropriately, you have the legal right to complain to law enforcement agencies.
All complaints can be made to the state attorney general’s office, the Federal Consumer Financial Protection Bureau and the Federal Trade Commission.
States most times possess their own debt collection laws and exceed the federal statutes.
Hence, contacting the states attorney general office is the most efficient way to know what practices are prohibited by state law.
It’s advisable that you keep records of every single contact made with a debt collector.
If for example, you speak to a collector on the phone, put down a note once the call is over, which describes the details of your discussion.
When you keep thorough records you can easily document violations that can be used as evidence of such actions later.
WHAT ACTIONS CAN I TAKE AS A CONSUMER UNDER THE PROTECTION OF THE FDCPA?
If you are certain that actions against you by a debt collector, has broken the law, you need to take action.
You possess the legal right to sue a debt collector in a federal or state court within a year from the specific date the said law was supposedly violated.
In situations where you can prove that you suffered damages such as medical bills or lost wages due to the illegal collection actions of the debt collector.
A judge may order the said collector to pay you in order to cover damages done.
What’s more, if you cannot prove actual damages, the judge can still order the debt collector to pay you up to $1000.
Furthermore, a class, which is a group of people, can sue a collector to recover up to $500,000 or 1% of the debt collector’s net worth, depending on whichever is lower
Again, ensure that you keep records. Voicemails, phone call logs, letters, and text message can be very strong evidence to bring to the notice of the jury or judge.
When taken together the records show the debt collectors pattern of behavior.
The FTC protects consumers in order to shield them from dubious, unfair and deceptive business methods.
A lot of states possess their own laws for debt collection which most times differ from the Federal Debt Collection Practices Act as well as strengthen it.
This is why it’s vital to reach across to your State’s attorney general’s office in order for you to determine your rights under state law before you go ahead with legal actions against a debt collector.
WHEN A DEBT COLLECTOR SUES ME, WHAT DO I DO?
If a debt collector sues you over a debt, ensure that you and your attorney are in court on the date scheduled. If you, however, do not make an appearance, the judgment automatically is in favor of the collection agency.
This will then enable them to possess the legal right to keep trying to collect.
If you feel your rights have been violated by the collection agency, respond with an equivalent lawsuit. This is extremely vital in order for you to preserve your rights.
If you do not know your rights with regards to what the debt collection agency can do or not do, you can be placed under undue stress.
Due to the aggressive nature of debt collectors who abuse, threaten, harass and even intimidate consumers, it is necessary for debtors to be protected.
This is where the FDCPA comes in, the act offers consumers protection against unlawful debt collection practices.
Not only can you shield yourself against illegal threats by debt collectors, but you are also within your legal rights to sue them if you believe they are going against the law by their actions.
This is in order to prevent unlawful treatment of debtors. Both the Federal and State Fair Debt Collection Act aims to preserve the rights and dignity of borrowers. Debt collectors are known by their aggressive nature and consumers need to be protected from such.
Remember though, that, the FDCPA law only protects defaulting consumers who are being abused or threatened by third-party collection agencies. These agencies either purchased your debt or were hired by the initial lender.
Most importantly, ensure that you keep detailed documentation of all conversations between you and the debt collector as this is your proof of their illegal behavior or actions towards you.
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