Fair Debt Collection Practices Act

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The Fair Debt Collection Practices Act was designed by Congress to protect consumers from abusive or unfair practices by creditors and debt collectors. This consumer protection act comes as an amendment to the Consumer Credit Protect Act, and provides people with legal protection from abusive debt collection practices.

The Fair Debt Collection Practices Act was created to encourage honest and fair dealings in debt collection, to provide consumers a means to dispute debt information. To explore this concept, consider the following Fair Debt Collection Practices Act definition.

Definition of Fair Debt Collection Practices Act

Noun

  1. An amendment in the Consumer Credit Protection Act that protects consumers against debt collectors.

Origin

Enacted September 20, 1977

What is the Fair Debt Collection Practices Act

Any person or entity to which money is owed, called a “creditor,” has the legal right to take certain steps to collect that money. Many creditors handle the collection activities themselves, though the task may be assigned to another. An individual who makes a living collecting debts owed to others is referred to as a debt collector.

Throughout modern history, many debt collectors tended to do whatever it took to collect the money owed to their employer, often resorting to questionable tactics. While these actions may have started out with civil requests for payment, those activities often devolved into acts that amounted to abusive, unfair, or deceptive collection practices.

The Fair Debt Collection Practices Act (“FDCPA”) was enacted in 1977 for the purpose of promoting fair debt collection, and to provide legal protection to consumers from brutal and contentious methods of debt collection. The FDCPA, enforced by the Federal Trade Commission (“FTC”), establishes ethical and legal guidelines that must be adhered to by creditors and debt collectors alike.

Congress approved the Fair Debt Collection Practices Act on September 20, 1977, as an amendment to the Consumer Credit Protection Act. The FDCPA is found in Title VII of the Consumer Credit Protection Act, where it is entitled “Debt Collection Practices.” This important amendment specifies how creditors can legally go about collecting monies owed to them, and how debt collectors must operate.

The FDCPA also defines the rights of consumers when dealing with debt collectors, and sets penalties for creditors and debt collectors who violate the act, as well as remedies available to the consumer. The full text of the Fair Debt Collection Practices Act is provided by the Federal Trade Commission as a pdf file at this link.

Debt Collector Required Practices

The FDCPA both prohibits debt collectors from engaging in specific activities, and requires them to follow certain practices. The required practices begin with the mandate to notify the consumer that an attempt is being made to collect the debt. Other debt collector required practices include:

  • Collector Identity – During any communication with a debtor, the debt collector must identify himself as a debt collector, and notify the debtor in the first communication that any information provided will be used to collect a debt.
  • Identity of the Original Creditor – The name and address of the original creditor must be provided within 30 days of the debtor’s written request.
  • Notification of Right to Dispute – The debtor must be notified of his right to dispute the debt, whether in full or in part.
  • Verify the Debt – Upon written request by the debtor, the collector must very the validity of the debt, and provide that verification in writing to the debtor.
  • Proper Venue in Civil Lawsuit – Any lawsuit filed by the creditor or debt collector in an attempt to collect a debt must be filed in the correct court venue. This means the lawsuit must be filed either in the jurisdiction in which the debtor resides, or in the jurisdiction in which the debtor signed the contract. The debtor, however, is free to file a civil lawsuit against the debt collector, should he engage in unlawful collection activities, in the jurisdiction in which the debtor resides, even if he has moved away from the jurisdiction in which the debt was incurred.

Unfair Practices for Creditors

The FDCPA makes it clear that certain behaviors or tactics are off-limits for creditors and debtors alike. These regulations protect consumers from harassment and threats of violence, from the use of obscene language, and other acts. Collection tactics strictly forbidden by the FDCPA include:

  • Misrepresentation or Deceit – A debt collector may not make false statements or lie to a debtor, or in any way use deceit in his attempt to collect the debt. This includes misrepresenting himself as a law enforcement officer or an attorney.
  • Profane or Abusive Language – A creditor or debt collector may not use profanity or any language that is abusive when communicating with a debtor.
  • Phone Calls After Hours – Debt collectors are prohibited from making telephone calls to debtors between the hours of 9:00 p.m. and 8:00 a.m. local time for the debtor.
  • Failure to Stop Contact – Contacting the debtor after he has provided written notice that he does not want any further communication with the collector, is prohibited. This includes any type of communication, except litigation notification.
  • Harassing Phone Calls – A debt collector may not cause the debtor’s phone to ring, or call any person repeatedly or incessantly with the intent to harass, annoy, or abuse the person.
  • Contacting a Debtor at his Place of Employment – A debt collector is prohibited from communicating with a debtor in any way at the debtor’s place of employment, once he has been told it is unacceptable.
  • Communication with Debtor Represented by an Attorney – Once the creditor or debt collector has been advised the debtor is represented by an attorney, the collector may not communicate directly with the debtor in any way.
  • Threats of Arrest – A creditor or debt collector may not claim that the debtor has committed a crime by failing to pay the debt, nor threaten him with arrest.
  • Use of Deceptive Documents – Creditors and debt collectors are prohibited from sending any documents intentionally designed to look like official court documents or documents from any governmental agency.
  • Threats to Seize Property – A creditor or debt collector is prohibited from making threats to seize the debtor’s property, or to garnish his wages, without the appropriate legal remedies, such as a lawsuit, having been instituted.
  • Publishing Information – A creditor or debt collector is prohibited from publishing the debtor’s name or other identifying information on a “bad debt” list.
  • Misrepresentation of the Debt Amount – A debt collector cannot misrepresent the amount of the debt, nor demand an amount that is not permitted by the original contract, or by application law.
  • Post-Dated Checks – A creditor or debt collector cannot collect a post-dated check from a debtor, then deposit it into the bank early.
  • Communication with Third Parties – Creditors and debt collectors are forbidden to give false information about the debtor to anyone, and from discussing the debtor or debt with any third party.
  • Communication by Embarrassing Media – A creditor or debt collector cannot communicate with a debtor by open mail, such as a post card, nor by any public or social media. Mailings to the debtor cannot identify the communication as an attempt to collect a debt on the outside of the envelope or notice.

For example:

When Robert lost his job, he fell behind in making payments on his credit cards, his student loan, and his car loan. Robert’s car was eventually repossessed, and he began receiving phone calls from all of his creditors on a regular basis. Eight months later, Robert found a new job, but his credit card debts had already passed into the hands of credit collection agencies.

Although Robert told the collectors that he would begin making small payments “soon,” as he had found a new job, one debt collector engaged in a pattern of harassing phone calls that came repeatedly each day, and often late at night. The collector called Robert while he was at work, using profanity and threatening Robert with arrest or legal action. Finally, the debt collector sent a fax to Robert’s new employer, describing Robert’s debts, and implying the employer would soon be required to withhold a portion of Robert’s paycheck each week for a garnishment.

In this circumstance, the debt collector harassing Robert has clearly violated a number of provisions of the Fair Debt Collection Practices Act. Robert can and should file a complaint with the appropriate government agency, and could, in good faith, file a civil lawsuit against the collector and his employer.

Debts Covered Under the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act covers all household, family, and personal debts. These include credit card debt, auto loans, personal loans, medical bills, and mortgages. The FDCPA does not cover business debts, which means that attempts to collect debts incurred in opening or operating a business are subject to different rules. If the consumer is unsure about whether a debt is covered under the FDCPA, he should contact an experienced attorney.

Reporting Violations of the Fair Debt Collection Practices Act

In the event an individual believes a debt collector has violated the law in attempting to collect a debt, he has the right to file a civil lawsuit in either state or federal court, though this must be done within one years of the violation date. If the debtor is successful in court, he may be awarded damages for such losses as lost wages, medical bills, and pain and suffering, in addition to payment of his attorney’s fees. The judge may award the debtor as much as $1,000 even if he is unable to prove that suffered actual damages.

Alternatively, or additionally, the debtor may file a complaint against a debt collector who is in violation of the Fair Debt Collection Practices Act. Such a report may be filed with the state Attorney General’s office, the Federal Trade Commission, or the Consumer Financial Protection Bureau.

Supreme Court Ruling on Attorney’s Fees in an FDCPA Lawsuit

In 2007, Olivea Marx found she was unable to pay her student loans, and her default ended up in the hands of a debt collector, General Revenue Corporation (“GRC”). Marx eventually filed a lawsuit against GRC, claiming that, in their attempt to collect the amount she owed on her student loans, GRC had engaged in tactics that violate the Fair Debt Collection Practices Act. The company’s harassing methods included sending a fax to her employer, and calling her on the phone several times a day.

At trial, Marx was unsuccessful in proving her case against GRC, and was ordered to pay GRC’s court costs and attorney’s fees. Marx appealed the ruling on the court costs and fees, arguing that the FDCPA allows an order for a plaintiff debtor to be ordered to pay the collector’s attorney’s fees and court costs only if the lawsuit was filed in bad faith. This means that the lawsuit was filed maliciously, for some improper purpose. Filing a lawsuit against a debt collector for abusive debt collection practices does not fit that description, if the plaintiff truly believed he has been abused or harassed.

Marx appealed the trial court’s decision to award GRC legal fees, but the appellate court ruled in GRC’s favor. This case of Marx v General Revenue Corp., which many believed had the potential to affect consumers’ willingness to risk taking legal action against debt collectors, was then appealed to the U.S. Supreme Court. After consideration of all of the issues, the Supreme Court ruled that, while the FDCPA does allow judges to award defendant debt collectors in lawsuits filed maliciously, Olivea Marx clearly filed her suit in good faith, and could therefore not be ordered to pay the defendants’ legal fees.

Related Legal Terms and Issues

  • Creditor – A person or entity to whom money is owed by another person or entity.
  • Debtor – A person who is in debt, or under a financial obligation to another.
  • Intent – A resolve to perform an act for a specific purpose; a resolution to use a particular means to a specific end.
  • Litigation – The process of taking legal action; the process of suing someone, or of trying someone for a criminal act.