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Fair Debt Collection Practices Act

Purpose & Benefits:• Eliminate abusive practices.• Not competitively disadvantaged.• Promote consistency.• Protects consumers• Benefits ethical collectors.• Sets a professional standard.• Fosters a fair and competitive environment.

Accountable Parties• Third- Party Debt Collectors.• Debt Purchasers.• Attorneys.• Creditors.

Problems with Non-Compliance• Financial liability for both agency

and the individual.• Costly and time consuming to

respond to complaints and lawsuits.• Career threatened.

OVERVIEW


A consumer is:• Any natural person.• Obligated to pay a debt. • Does not include businesses.Does include:• Executors.• Administrators.• Parents/Guardians

(if consumer is minor)

• Spouses. (limited circumstances, approved by state law)

COMMUNICATING WITH THE CONSUMERS

The FDCPA governs communications between consumers and debt collectors in connection with the collection of debt.

A debt is:• An obligation.• Arises from a transaction. • For personal, family or household

purposes.

Communication is:Conveying information–either directly or indirectly–to any person, through any medium, regarding debt.

Communication is prohibited:• At a time that is known to be

inconvenient to the consumer.• Before 8:00 a.m. or after 9:00 p.m. local

time at the consumer’s location.• If the consumer is represented by an

attorney.• If it is known or reasonably understood

that the consumer’s employer would prohibit it.


Mini- Miranda Disclosure: “This is an attempt by a debt collector to collect a debt. Any

information obtained will be used for that purpose.”


• Recite the Mini-Miranda in the first written and first verbal communication with a consumer.• All communications with

consumers must indicate that the communication is from a debt collector.• Some states laws require the

Mini- Miranda in additional communication with consumers.

Do not recite the Mini-Miranda when:• Leaving a message with someone.• Leaving a message on an

answering machine.• Obtaining location information.• On fax coversheets or postcards.• On employment verification

requests.


Cease Communication


When a consumer requests that you cease communications:• It must be written.• Once received, you may not

communicate or contact any other parties.

Fair Debt Collection Practices ActTHIRD PARTY COMMUNICATIONS

Who May Be Contacted:• Consumer

(if not represented by an attorney)

• Creditor• Attorney for Creditor, Debt

Collector or Consumer• Credit Reporting Agency

(if otherwise permitted by law)

• Consumer’s Spouse (if permitted by state law)

• Consumer’s Parents (if consumer is a minor)

Clarification of an Attorney• Someone who graduated from law

school and passed Bar examination of at least one state.

• A person acting pursuant to the power of a attorney is merely an agent to the consumer under a principal agent relationship

• Communicating with the power of Attorney is not permitted and would be considered a Third Party Disclosure Violation

If an attorney represents the consumer in regards to a debt that the debt collector is collecting on, the collector must contact only the attorney unless:• The Attorney fails to respond within a reasonable period of time.


Regulated Third Party CommunicationDO NOT:•Reveal the existence of a debt to any party.•Use symbols or language in written communication.•Use postcards•Discuss the existence of a consumer’s debt with:The consumer’s employer and/or coworkers.FriendsNeighborsRelatives(excluding the consumer’s spouse, as otherwise permitted by law)

Laws to Consider:• Health Insurance Portability

and Accountability Act (HIPAA)• Gramm-Leach-Bliley Act

(GLBA)


Obtaining Location Information:• Identify yourself by name only.• State that you are trying to locate

the consumer.• Request only home address, home

phone number and place of employment.• Contact a third party only once.

Employer VerificationYOU CAN:• Call the employer and request the company to verify whether or not the consumer is currently employed by the company.

YOU CANNOT:• Request the consumer’s work phone number, supervisor’s name, dates of employment or any other information.

Fair Debt Collection Practices ActCOMMUNICATING WITH THE CONSUMERS

When leaving messages on answering machine or voicemail:• Make sure you are reaching the

correct consumer.• Never leave a message that

would identify the existence of a debt.

What is a Pre-Recorded Message:• Any message recorded and

communicated to a consumer, no matter how long or how short.

• Must follow the Telephone Collection Protection Act (TCPA) & Federal Communications Commission. (Found in Chapter 4 & 12)

Examples:• An automated message system

that leaves a standard collection message.

• The recorded operator in your voicemail system is considered a pre-recorded message.

• An introductory message from an auto dialer stating that someone is going to pick up the phone soon.

Issues with Pre-Recorded Messages:• Debt collectors must comply with the

Telephone Consumer Protection Act• Abide by disclosure requirements • See Chapter 4.2.1 of ACA

International’s Guide to the Fair Debt Collection Practices Act for guidance

Fair Debt Collection Practices ActCOMMUNICATING WITH THE CONSUMERS

Caller ID Concerns:• If an agency’s telephone number

appears on caller ID, it could disclose that the call relates to a debt and lead to a third party disclosure.Consider:• Blocking the agency’s name.• Using an acronym for the

agencies name if state law permits.

Written Communication:• It is permissible to contact a third party in

writing if the envelope does not indicate that the communication is from a debt collector.

• Avoid communication via fax or e-mail.• Using open face communication could

result in FDCPA violations.

ACA does not recommend using these methods of communication to collect a debt, due to the risk of third party disclosure:• Answering Machine• Fax Machine• Pagers• E-mail• Cell Phone

Fair Debt Collection Practices ActVALIDATION & VERIFICATION

Validation Notice:• Required disclosure• Provided to the consumer• Informs consumer of their right to request

verification of the debt• Should be in writing • Is required each time a subsequent

collector takes over an account• Must be sent within five days of initial

communicationShould Include:

“See Reverse Side for Important Information” (If printed on the reverse side of the letter.)

Mini-Miranda Disclosure (If first time you are communicating with consumer)

Must contain:• Amount of debt• Name of creditor to whom the debt is owed• Statement that unless the consumer, within 30

days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector

• Statement that if the consumer notifies the debt collector in writing within the 30-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment will be mailed to the consumer by the debt collector

• Statement that, upon the consumer’s written request within the 30-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.


Overshadowing:• A validation notice may not be

contradicted or overshadowed by other communications or notices.

• A validation notice is considered overshadowed or contradicted if a subsequent letter includes information that is inconsistent.

Overshadowing the Validation Period:

The Validation notice should not:• Demand immediate payment.• Be inconsistent so as to cause

confusion.• Be printed in smaller font.• Be buried in other text

Settlement Offers:A settlement offer allows the consumer to settle the debt for an amount less than the total owed.SETTLEMENT OFFERS CANNOT:

• Overshadow the validation period.• Use deceptive language to present

the offer.

Collection Efforts:While pursuing collection activity during the validation period:The debt collector MUST cease collection activity if a written verification request is received.


Legal Action:You Can:Debt collectors can file suit during the validation period.You Cannot:Debt collectors cannot contradict the right to request verification.

Verification Request:• A consumer has the right to request

verification during the 30-day validation period.

• Verification includes any materials that substantiates the consumer incurred the debt.

• A request for verification must be submitted in writing

Verification Request Response:Upon receipt of a consumer’s written request for verification, the FDCPA requires all collection efforts cease.• A collector cannot send a fax to

verify a debt.• Verification cannon be mailed by

the creditor.

Verification Request Obligations:• Debt Collectors are NOT obligated by the FDCPA to send verification of debts AFTER the 30-day validation period.• However, if you do not meet the

consumer’s request, your odds of collecting may be diminished

Fair Debt Collection Practices ActCREDIT REPORTING

Credit reporting is a collection activity when it is:• A communication in connection with the collection of a debt.• Done after a written dispute is received, but before responding to the dispute with verification.

Credit reporting IS allowed during 30-day validation period unless a written dispute is received.

Brady Decision• Has major implications for the collection industry. In February 1999, ACA issued an action alert

stating:The plain language of section 1692e(8) required debt collectors to communicate the disputed status of a debt if the debt collector “knows or should know” that the debt is disputed. This standard requires no notification by the consumer, written or oral .

• Consumers who wish to dispute a debt do not have to do so in writing.• Collection agencies are obligated to report a dispute, whether it is oral or written,

when reporting a debt to a credit reporting agency.

Bankruptcy Issues:After consumer files for bankruptcy there must be:• Automatic Stay (injunction that stops all collection activity right after bankruptcy is

filed) goes into effect.

Fair Debt Collection Practices ActHANDLING PAYMENTS

Application of Payments:• If the debt is undisputed and interest is being collected on it, the debt collector is permitted to

apply payment first to the interest then to the principal.• Payment allocation is governed by state law and/or specified by the contract with the creditor

Multiple Accounts:• Debt collectors collecting multiple debts from a consumer may NOT apply a payment to

any debt that is DISPUTED by the consumer.• If the debt collectors are collecting multiple accounts from the same consumer, the

consumer must specify to which debt the payment should be applied

Overpayments/Refunds: Resolve/Refund the overpayment• Contact the consumer for payment instruction.• Comply with state law.• Follow internal policies and procedures.

Fair Debt Collection Practices ActUNFAIR PRACTICES

Examples of Unfair Practices:• Adding Interest, Fees, Charges or Expenses.• Accepting , soliciting or depositing postdated checks

or other postdated payment instruments.• Causing a consumer to incur charges.• Possession and Disablement of Property.• Postcards and Envelope restrictions.

Fair Debt Collection Practices ActHARASSMENT AND ABUSE

Examples of Harassment and Abuse: • Threats of Violence.• Use of Obscene or Profane Language.• Publishing a list of consumers who allegedly refuse to pay debts.• Causing the phone to ring repeatedly to annoy, abuse or harass any person.• Placing phone calls without meaningful disclosure of the caller’s identity• Advertising for sale any debt in order to coerce payment of the debt.• Harassment and abuse can occur through oral and written communications.

YOU AND YOUR AGENCY ARE LIABLE FOR YOUR ACTIONS.

Fair Debt Collection Practices ActFALSE AND MISLEADING REPRESENTIONS

The FDCPA prohibits a collector from making false and misleading representations:• An example of this is claiming to be an attorney when in fact he/ she is not.

Other False and Misleading Representations:• Government Affiliation.• Misrepresenting Amount owned or Legal Status.• Unintended or Unlawful Action.• Threatening Arrest or seizure of Property.• False Accusations.• False Legal Documents.• Reporting a Disputed Debt.• Misrepresentation of Identity.• Misrepresentation of CRA.• False and Deceptive Means.

Fair Debt Collection Practices ActLIABILITY

Personal Responsibility:• Ensure compliance with the FDCPA.• Know the federal and state laws.• Be aware of changes.• Ask for help.

Enforcement:• The enforcement of the FDCPA is

assigned primarily to the Federal Trade Commission (FTC).

• The government reserves the right to bring administrative enforcement against debt collectors when the action affects the general public.

Common Violations:• Harassment• Failure to send notice.• Failure to verify disputed debts.• Calling a consumer’s place of

employment.• Revealing alleged debt to third

parties.• Failure to cease communication.• Threatening the consumer• Demanding larger payment.• Violations affect the image of the

collection industry and can cause bother agency and person liability.


Actual Damages:• Consumers have a “right of action”.• Civil liability may be assessed in the

form of:• Actual Damages • Statutory Damages• Court Costs• Reasonable Attorney Fees.

Actual Damages could include:• Money illegally collected.• Unlawful collection charges or

interest.• Lost Wages.• Cost of treating mental or physical

injury.

Some courts have ruled that actual damages could include “out-of-pocket expenses” and damages for:

• Personal Humiliation.• Embarrassment.• Mental Anguish.• Emotional Distress.

The consumer bears the burden of proof:• Must prove a reasonable

connection between debt collector’s conduct and emotional or physical damage alleged by the consumer


Emotional Distress:The consumer must show that the debt collector’s behavior:• Was extreme and outrageous • Was intentional or reckless• Resulted in emotional distress• Resulted in distress that was

severe

Consequences for Non-Compliance:Collectors can be held liable for:• Actual damages• Statutory damages up to $1,000• Attorney’s fees

• Up to $500,000 or 1% of the agency’s net worth for class action suits.

Are You Personally Liable?• Liability is not limited to the

collection agency• Individual debt collectors may be

held liable for violations to the same extent as the agency

Bona Fide Error:Collectors must show by a preponderance of the evidence• The error was unintentional• Resulted from a bona fide error• Occurred despite procedures

reasonably adapted to avoid such errors

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