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THE FAIR DEBT COLLECTION PRACTICES ACT
15 U.S.C.A. 1692 et. Seq.
The federal Fair Debt Collection Practices Act (FDCPA) controls the business activities of third party debt collectors and governs what they may say, may do and must write. The purpose of this unit is to educate the reader about matters readily observable from documents to the trained eye.
What is a third party debt collector? Anyone whose principal business purpose is the collection of debts owed or asserted to be owed another or who regularly collects debts owed or asserted to be owed another as a part of their on-going business relationships. To qualify as a debt, the matter sought to be collected must not be in current payment statement status when acquired by the collector. That is, it must be delinquent or in default.
Examples of debt collectors include, but are not limited to:
- A collection agency is a debt collector
- Large national collection agencies you will frequently encounter are firms like GC Services Corp., NCO
- Smaller independent collection agencies operate in communities across the United States
- Independent, free-lance collectors operate from their homes or small offices
A debt buyer is a debt collector who purchases delinquent debt data from creditors or from other debt buyers, Often these rights are bought for pennies on the dollar. They then add interest and perhaps other charges and attempt to collect the entire balance from the debtor. You may see correspondence or lawsuits originated by Midland Credit, LVNV Funding, Portfolio Management Services, Pinnacle Credit Services, Palisades Collection, LLC, Asset Acceptance LLC, and many others, who buy debt for pennies on the dollar, but
- A pre-collect service that urges debtors to catch up delinquency is a debt collector
- A separate organization that collects medical accounts for several independent medical practices or groups is a debt collector
- An attorney at law is a third party debt collector in the representation of a client, but the simple filing of a lawsuit by an attorney is not within the ambit of the act if that is all the contact with the debtor the attorney has. Some law firms are simply collection agencies that employ licensed attorneys to handle unpleasantness that arises and “paralegals” who are telephone collectors with a title. You will find pleadings and correspondence authored by Frederick R. Hannah Associates and Mann-Bracken commonly in this group in this region.
- A check buying service is a debt collector
- A repossession company is a debt collector, if the debtor has the option to pay the repossessor to avoid the taking
It is also useful to understand what is not a debt and who is not a DC
- Creditors, generally, are not governed by the act, however, among those expressly included as "debt collectors" are creditors who are collecting their own debts but who use a name other than their own, which would indicate that a third person is collecting or attempting to collect such debts. The triggering of the FDCPA does not depend on whether a third party is in fact involved in the collection of a debt, but rather whether a least sophisticated consumer would have the false impression that a third party was collecting the debt
- Commercial debt collection is not governed by the act
- nor are internal collection departments of creditors, with certain exceptions,
- nor are government agencies,
- nor are debt servicers that just receive payments
- nor is any enterprise whose principal purpose is not the collection of debts owed or asserted to be owed another, although if it "regularly" does so then the act likely applies, e.g. an attorney who sends a couple of dozen collection demands a year
When a threshold status determination has been made, the next step is to look at the documents that evidence the debt. That could be correspondence, a complaint or attachments to the complaint. Ordinarily, an FDCPA action is best talked out with the client to find all aspects of potential wrongdoing, for example there also might be a Fair Credit Reporting Act violation lurking in the background and there could be state tort claims as well but those will be addressed in other materials.
The first step the FDCPA requires of a debt collector (DC) is that within five days of the initial communication with the debtor in connection with the collection of a debt the debt collector must send written notice containing certain information. Understand here that the FDCPA is a federal consumer remedial statute, it trumps less restrictive state laws and it must be strictly construed. It must not be confusing to the least sophisticated consumer, that's the Eleventh Circuit standard, and the disclosures must not be overshadowed by something attention grabbing or scary.
NOTICES
First Notice
1692e(11)
Every notice must contain the legend "This is an attempt to collect a debt. Any information obtained will be used for that purpose."
1692g
(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing-
- the amount of the debt;
- the name of the creditor to whom the debt is owed;
- a statement that unless the consumer, within thirty 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;
- a statement that if the consumer notifies the debt collector in
writing within the thirty-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 against the
consumer and a copy of such verification or judgment will
be mailed to the consumer by the debt collector; and
- a statement that, upon the consumer's written request within
the thirty-day period, the debt collector will provide the
Consumer with the name and address of the original creditor, if different from the current creditor.
The disclosures must be clear and conspicuous. Sloppy practices may be found with the larger and smaller DCs alike. The larger ones get careless or just don't care because consumer damages are limited and considered a cost of doing business. With the smaller ones, often it is just a matter of ignorance or deliberate disregard for the law. Either way it is actionable.
A casual examinnation of the first notice might show
- Unless you dispute this debt within 30 days...VIOLATION the DC must tell the consumer they have a right to dispute "any portion thereof" as well
- Unless you dispute this debt, or any portion thereof, in writing...VIOLATION: The FDCPA does not require a written dispute to defeat the DCs entitlement to presumption of validity (note that such presumption is rebuttable, anyway)
- Failure to tell the consumer verification can be had on request
- Failure to tell the consumer that the name of the original creditor will be revealed upon request
- Failure to state on every written notice "This is an attempt..."
Although many of the most common violations found will be readily apparent from the first notice, there are several more than can be quickly seen from the docs as well:
- DCs will sometimes communicate by post card. That is a VIOLATION
- DCs cannot use any indicia on exterior of correspondence that suggests that they are collecting a debt
- DCs will sometimes add collection fees to the balance owed. That is a VIOLATION unless collected by or through an attorney at law and then recovery is limited by statute.
- DCs will attempt to collect, even sue upon, debts that are time barred by the applicable statute of limitations. This is a VIOLATION, although authority seems to be settling that a DC may send a debtor with a time barred account an "invitation to feel better by clearing up the matter."
- DCs must clearly disclose their identity-VIOLATION
- DCs can't overshadow disclosures...VIOLATION
- DCs can disclose on back side, but not too light to read...VIOLATION
- DCs can't write non-debtors about a debt...VIOLATION
- DCs can't re-age consumer account data for Consumer Reporting Agency (CRA) purposes...VIOLATION
- DCs can't continue reporting disputed information to CRAs without reporting dispute
- DCs cannot falsely represent that docs are legal process...VIOLATION
- DCs cannot falsely represent that docs are not legal process...VIOLATION
Consumer damages are limited to $1000 per debt plus attorney's fees and expenses by federal statute, but often state tort claims are available as well AND
OCGA 10-1-391 et seq. The Georgia Fair Business Practices Act (most states have a Uniform Deceptive Trade Acts and Practices Act equivalent and Georgia has one in addition)), applies to debt collection activities and provides treble damages for willful violations together with costs and attorney's fees. For counterclaims, the 30 day ante litem notice requirement of OCGA 10-1-399 (b) is not triggered. The notice is required with a direct claim, and generally results in quick settlement.
Top of Page
FAIR CREDIT REPORTING ACT
15 U.S.C.A. 1681 et. seq.
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Illegal Debt Collection
- "How can I offend thee?"
- What can you do?
- Help!! I've been sued!
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| START
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Unfair Credit Reporting Acts
- Your right to accuracy
- Identity theft
- What are my remedies?
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| TAKING ACTION
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The Unreal Car Deal
- How to avoid rip-off
- What's a yoyo deal?
- What can a lawyer do?
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| TODAY!!
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Civil Wrongs at Work
- What is discrimination?
- What is harrassment?
- What is retaliation?
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