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The Fair Debt Collection Practices Act and How it Protects You

The following post is part of our Law Student Blog Writing Project, and is authored by Caitlin DiCrease, a law student from Ohio State University Moritz College of Law.

What is the Fair Debt Collection Practices Act?

The Fair Debt Collection Practices Act (“FDCPA” for short) is a federal law under 15 U.S.C. § 1692, created in 1977 to stop creditors from harassing individuals during the debt collection process. Its purpose is to protect consumers from being inappropriately threatened or intimidated by debt collectors. The FDCPA prohibits collections agencies from making threats, using deception, and engaging in other unfair or harassing actions, as well as requires that the collections agency act in a professional and reasonable way when attempting to collect on a debt.

Debt collection is a real problem that impacts over 30 million individuals in the United States, which is approximately 14% of the country’s adult population. Many Americans have debts that are or could be subject to the debt collection process. The average debt amount is $1,500.00, but much larger amounts can result from excessive use of credit cards, medical bills, or other debt. As such, debt collection is an incredibly large and profitable industry.

In the 1970’s, Congress began investigating debt collection practices and found that there was “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” Additionally, the reports showed that “[a]busive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.” These results caused Congress to pass the FDCPA in an attempt to protect consumers and to regulate the debt collection process. The FDCPA protects all consumers who have fallen into personal debt from the predatory and harassing behavior that collections agencies may engage in, such as calling multiple times a day, threatening legal actions unrelated to the underlying debt, and speaking to a third-party about the consumer’s debt.

What type of debt is covered by the FDCPA?

Debts such as personal credit cards, auto loans, medical bills, mortgages, and other personal debts are covered by the FDCPA. Any household or family debts are also covered. However, the act does not apply to debts that have accumulated through the running of a business. Additionally, the FDCPA only covers debts that were entered into voluntarily – debts from fines, parking tickets, or other court-imposed debts are not included.

What does the FDCPA protect against?

Most often, debt collectors will contact consumers via email, letter, or phone. When a collections agency contacts you, there are certain behaviors that are not allowed under the FDCPA. These behaviors fall into the main categories of (1) harassment; (2) deception; (3) threats; and (4) unfair practices.

Harassment: There are no bright-line tests to determine what is harassment under the FDCPA. Examples of harassing behavior includes publishing the names of debtors, using obscenities or profanities, repeatedly calling you, or calling you at inconvenient times (such as before 8:00am or after 9:00pm), and contacting you at work if you have told them not to do so. The FDCPA also prohibits a debt collector from contacting you if you have written a cease and desist letter requesting that they stop calling or sending collections letters.

Deception: A debt collector may not, under any circumstances, lie about their identity. They are prohibited from representing themselves as an attorney (unless they are a lawyer who works in debt collection) or as a representative from a government agency. They also may not falsely claim that you have committed a crime by failing to pay your debt, misrepresent the amount of any debt, or tell you that you may be arrested if you do not pay the debt. Collectors also cannot misrepresent legal documents that have been sent to you.

Threats: Collections agencies may not threaten you with legal action, unless they intend to take legal action and such action would be allowed by the court. A debt collector may not threaten to have you arrested, to seize your property or wages, or to deprive you of custody or welfare benefits. While a debt collector can sue you for unpaid debt, they cannot have you arrested and cannot take anything from you until they have a court order that allows them to do so. Furthermore, certain welfare benefits and custody payments are untouchable by debt collectors even after they have successfully sued for the debt.

Unfair Practices: These include contacting a third-party (such as a relative, neighbor, or employer) about your debt, and/or making misleading, or deceptive representations to you or a third-party. The only contact a debt collector may have with a third-party regarding your debt is contact for the purpose of obtaining your location or contact information. They may not disclose that you owe a debt to any third-party. Unfair practices also include using a false company name, sending you documents that appear to be from a government agency, trying to collect illegal interest fees on top of the original debt, or depositing a post-dated check early.

Which debt collectors are subject to the FDCPA?

The FDCPA only applies to debt collectors. A debt collector is any person who regularly collects, or attempts to collect, consumer debts for another person or institution. This means that it does not apply to the original creditor, but will apply to any party that subsequently acquires the debt. Debt collection agencies subject to the regulations of the FDCPA include collection agencies, lawyers who collect debts on a consistent basis, and companies that buy debts from the original creditors.

To break this down, say you have accumulated debt on your store credit card from Company A. If Company A is attempting to collect on the debt, they most likely are not subject to the FDCPA provisions. However, if Company A has sold the debt to Collections Agency B, and Collections Agency B attempts to collect on the debt by contacting you, it must abide by the requirements of the FDCPA. Collections Agency B, therefore, may not contact you late at night, harass or threaten you, or make deceptive statements in its collections process. Many creditors engage in this process of “selling debt” to collections agencies, and in fact most debt that remains unpaid will be sold to a third-party debt collector.

What can I do if a debt collector is violating the FDCPA?

The Federal Trade Commission (“FTC”) is the government agency responsible for enforcing the provisions of the FDCPA. If a debt collector is violating the rules of the FDCPA, you have the ability to sue the collector in state or federal court within one year of the violation. If you win the case, you can recover damages suffered as a result of the illegal corrections methods – such as lost wages and medical bills. Many states also have their own versions of the Fair Debt Collections Practices Act that can impose additional sanctions on debt collectors who have acted illegally. However, even a successful suit against a debt collector for violations of the FDCPA will not eliminate the debt that you owe.

To report a violation of the FDCPA, you may contact the FTC, your state’s Attorney General’s office, the Consumer Financial Protection Bureau, or an attorney.

What happens if a debt collector sues me?

Under the FDCPA, a debt collector cannot make threats to sue you if they have no intention of starting a suit, or if there is no legal basis for a suit. They can, however, sue you in an attempt to collect the unpaid debt. If the collector wins the suit against you, the court will enter a judgment stating the amount of money you owe and an order allowing the collector to take the money from you through a garnishment. Garnishment is when the court directs your bank to turn over portions of your paychecks or funds in order to pay off the debt.

Unlike wages, many federal benefits cannot be garnished by a debt collector. These include Social Security Benefits, Supplemental Security Income, Veteran’s Benefits, and Civil Service, Federal Retirement, and Disability Benefits. These federal benefits can only be garnished for debts of child support, alimony, taxes, or student loans. They cannot be taken by an ordinary debt collector, even if that collector has won a suit against you.
You will receive a notice when a debt collector has started a lawsuit against you. If the debt collector files a lawsuit, you should respond to the lawsuit either personally or through a lawyer. Ignoring the suit will not make it go away and could result in a default judgment being entered against you. A default judgment can damage your credit score. If you have ignored the lawsuit, you also will lose the opportunity to object to the garnishment of your wages.

Have a problem with debt collectors? Maybe we can help! Call Lawrence & Associates and ask for a free consultation. We’re Working Hard for the Working Class, and we’d like to help you!