Creditors: Don’t forget that debtors have rights.

Federal law creates a minefield for individuals and businesses attempting to collect debts.  The primary source that regulates creditor conduct is the Fair Debt Collection Practices Act (FDCPA), a federal statute that purports to protect consumers by forbidding abusive debt collection practices.  When construed in tandem with a creditor’s right to pursue collection of valid debts, the law can appear to unnecessarily obstruct collections efforts.  In reality, compliance with the law does not have to pose an insurmountable challenge to satisfying debts.  It does, however, demand careful attention to detail, as each subsection contains directives which carry serious consequences if disregarded.

WHO does the FDCPA regulate?

The law regulates creditors, that is, any natural person or entity who offers or extends credit creating a debt or to whom a debt is owed.  Its protections extend to consumers, which are legally defined as natural persons who have incurred a debt primarily for personal, family, or household use. As such, the FDCPA applies to what is generally known as “consumer” debt.

The FDCPA applies to creditors acting in the capacity of a debt collector, which the law defines as anyone who uses an instrumentality of interstate commerce (telephone, email, or U.S. mail, primarily) for the purpose of collecting a debt.  This may include individual creditors who are attempting to collect debts directly, or third parties whom creditors engage for the sole purpose of collecting a debt, such as an agency, a corporation’s internal collections department, or an attorney hired to pursue a debt for its client.

WHAT does the FDCPA regulate?

The FDCPA regulates debt collectors’ conduct in collecting consumer debt and establishes clear guidelines for debt collectors by setting out both prohibited and required practices in collecting delinquent debts. While some are fairly obvious, others are less intuitive and it is critical to understand what types of acts and omissions constitute a violation.

One of the most critical requirements the law imposes is the “1692g” notice, colloquially deemed the “mini Miranda notice.”  The notice comprises a statement clearly informing debtors of their right to dispute the debt.  The debt collector must include this notice in its very first communication with the debtor, then wait 30 days from the debtor’s receipt of the notice before resuming collection efforts.  If the debtor disputes the validity of the debt within the 30-day period, the debt collector is obligated to provide the debtor with a written verification of the debt.

The law is extensive and worth parsing.  However, some of the salient requirements and prohibitions are summarized below.

Other required conduct:

  • In the initial communication with the debtor, a statement that the communication is from a debt collector and that all information gained will be used for the purpose of debt collection;
  • In the initial communication with the debtor, the name and address of the original creditor;
  • In every subsequent communication with the debtor, a statement that the communication is from a debt collector; and
  • If a civil lawsuit is filed, it may be filed only in the venue where the consumer lives or signed the contract or note that gives rise to the debt.

Prohibited conduct:

  • Contacting consumers by telephone outside the hours of 8 am to 9 pm;
  • Failure to cease communication with the debtor upon either 1) a consumer’s written request that the collector cease communication with the consumer, or 2) a written notification that the consumer does not intend to pay the debt;
  • Frequent telephone calls or calls having a threatening or harassing tone;
  • Communicating with the consumer or pursuing collection efforts at the consumer’s place of employment (once advised by the employer that this is unacceptable);
  • Contacting a consumer known to be represented by an attorney;
  • Communicating with a consumer after a request for validation has been made;
  • Any statements that are false, misleading, or deceptive regarding the debt or the repercussions of failing to pay the debt;
  • Publishing the consumer’s name on a “bad debt” list;
  • Seeking unjustified amounts;
  • Threatening arrest or legal action;
  • Abusive or profane language in communications;
  • Communication with third parties – other than the consumer’s spouse or attorney – regarding the debt;
  • Reporting false information on a consumer’s credit report; and
  • Using embarrassing or false media to publicize the debt.

While these guidelines may appear mere technicalities, compliance with the letter and spirit of the FDCPA is critical.  The law holistically provides heightened protections to consumers, who are considered less sophisticated than corporate entities in the context of incurring debt and seeking credit. Additionally, the law staunchly protects the individual’s right to keep and enjoy his personal and real property, and thus debts associated with that property are regarded with considerably more lenience than business debts.

The attorneys at Miller Monroe & Plyler offer extensive experience advising business creditors on proper collection practices. If you are seeking to collect a valid debt and need assistance understanding your legal rights and obligations, contact our office for a consultation.

This article does not establish an attorney-client relationship and must not be construed as legal advice.  This article does not substitute the advice of an attorney in the course of legal representation, nor does it comprehensively analyze the relevant statutes.  Please seek the guidance of an attorney when attempting to apply the law to your particular case.

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