Stop Illegal Debt Collection Practices
The Fair Debt Collection Practices Act protects consumers from the unscrupulous collection practices committed by those attempting to collect a consumer debt. A consumer debt is defined as any obligation to pay money for a personal, family, or household item. Debts for business purposes are not covered by the The Fair Debt Collection Practices Act.
Who is a Debt Collector?
A person is a debt collector under the Act if they regularly use the U.S. mail or telephones to collect or attempt to collect a consumer debt owed to a third party (i.e., someone other than the actual creditor). But beware– if you are attempting to collect a consumer debt for your incorporated business, or limited liability company (LLC), you too could be a debt collector. Why? Because the debt is owed to your corporation, or LLC, not to you personally. When collecting a debt for your corporation, or LLC, you must make it clear to the debtor that you are acting on behalf of the company. If you don’t disclose that you are attempting collection on behalf of your company, and you spend more than four percent of your time attempting to collect on past due accounts through the mail or by the telephone, you might be deemed a “debt collector" under the Act.
To Whom May A Debt Collector Disclose Debt Owed
The Act limits the communications a debt collector may have with others regarding the debt. The Act provides that a debt collector may communicate only with the debtor, the debtor's attorney, a credit reporting agency, the creditor, and the creditor's attorney. The only exceptions are when the debt collector is attempting to locate the debtor, or to enforce a judgment. And then the debt collector must only disclose as little information as is necessary.
What A Debt Collector May Not Do
The Act prohibits a debt collector from:
- threatening to take any action that is illegal or which the collector does not actually intend to do (e.g. threaten to sue if you do not intend to follow through);
- attempting to collect an amount not authorized by the agreement creating the debt, or not otherwise allowed by any applicable law;
- misrepresenting: (a) the character, amount, or status of the debt, (b) credit information pertaining to the debtor, (c) the debt collector's name, or (d) any other facts to obtain information about the debtor;
- falsely stating the debtor has committed a crime or similar wrong;
- using a letter, or form, containing a false or misleading official seal of approval (e.g. fake court seal);
- using threats of violence or harm against the person, property, or reputation;
- harassing the debtor through the use of repeated telephone calls;
- abusing the debtor by using obscene or profane language;
- telephoning the debtor between 9:00 pm and 8:00 am (without the debtor's consent);
- telephoning the debtor after being informed that the debtor has hired an attorney;
- telephoning the debtor's workplace after being informed that debtor's employer forbids such calls;
- publishing a list of consumers who have refused to pay their debts (except to a credit bureau); and
- advertising the debt.
What The Debt Collector Must Disclose
Within five days after first contacting a debtor, a debt collector must send the debtor a written notice stating the amount of money owed; the name of the creditor to whom the money is owed; and what action you may take if you believe you do not owe the money.
The Act further requires that all communications by a debt collector to a debtor:
- disclose the purpose of the communication is to collect a debt,
- disclose the amount of the debt,
- disclose the name of the current creditor, and
- warn the debtor that the debt collector will assume that the debt is valid unless the debtor disputes the debt within 30 days.
If the debtor disputes the debt within 30 days, the debt collector must: (a) promise to mail the debtor verification of the debt and give the debtor the name of the previous creditor (if any) and (b) cease collection efforts until the debtor receives verification of the debt.
Penalties For Violating The Act
If a debt collector violates a provision of The Act, the debtor can report the violation to the state Attorney General's office and the Federal Trade Commission, and/or sue the debt collector in a state or federal court within one year from the date the violation occurred. If the court finds in the favor of the debtor, the court may hold the debtor responsible for: (1) the actual damages suffered by the debtor as a result of the violation; (2) court costs and attorneys fees; and (3)statutory damages up to $1,000.00. However, the debt collector may avoid the penalties if s/he can prove the violation was unintentional and resulted from a good faith error. To do so the debt collector would probably have to show s/he had procedures in place to avoid such errors.
If you are trying to collect a debt, disclose who you are and who you are collecting for and most importantly be truthful. Don’t compound your problems by breaking the rules. If you or your company expends any of its time attempting to collect on past due accounts, we strongly suggest you have your policies and procedures reviewed by a competent local commercial attorney. Different states have slightly different rules and you do not want to violate them.