Fair Debt Collection Protection Act (FDCPA)

The Fair Debt Collection Protection Act (FDCPA) was enacted on the 20th of September, 1977. It’s stated aim is to allow collection agencies to collect legitimate debt owed to them whilst protecting consumers by prohibiting collectors from using abuse, unfair or deceptive practices.

Who Is Considered A Debt Collector?

Under FDCPA a debt collector is defined as somebody who regularly collects debt on behalf of others. There is one exception to this and that’s in house collection agencies are not considered debt collectors under FDCPA.

For example if an individual misses several credit card payments the card issuer can use their in house collection agency to recover this debt and they won’t be subject to the FDCPA. This exception was made because legislators believed creditors had a vested interested in maintaining positive relationships with their customers. Although with the FTC receiving 125,136 complaints in 2012 there is increasing consumer advocate pressure on the government to change the Act to include in house collections.

What Debts Are Covered?

FDCPA covers personal, family and household debts. It doesn’t cover business debts or individual debts which are for business purposes.

What Are Debt Collectors Prohibited From Doing?

• Harassment and abuse:
  • Contacting consumers at inconvenient times (before 8am and after 9pm), unless authorized to do so by the consumer
  • Repeatedly using the phone to annoy somebody. Including: calling and hanging up immediately, constantly calling without a purpose, annonymous calls, calling without saying anything etc.
  • Intimidation tactics. For example, using profane or obscene language or using the threats of violence or harm
  • Publishing a list of consumers who owe money or refuse to pay their debts. This is seen as a humiliation tactic.
  • Calling at a place of work/identifying themselves as debt collectors when calling. The debtor must tell the debt collector orally or in writing that they are not allowed to get calls there before this applies.
  • Suing in courts far away from the debtors place of residence
• False Information / Misrepresentation:
  • Pretending to be an officer of the law. If a debt collector is pretending to be an officer, it’s important to collect the local police department immediately as impersonating an officer is a serious crime.
  • Claiming to be an attorney or credit reporting agency, if they are not.
  • Claiming that their correspondence are legal court documents, if they are not.
  • Claiming that legal court documents are not legal court documents.
  • Misrepresenting who they are to collect information about the debtor. For example, pretending to be running a survey.
  • Threatening to: arrest, file suit, garnish wages, ruin credit scores or credit history, sell or seize property unless the debt collectors plan to take that action.
  • Threats to take action that is illegal. For example, pursuing debt that’s past the statue of limitations.
  • Using a false company name.
  • Misrepresenting the amount owed.
  • Telling a debtor they’ll be arrested for their debt
  • Give false information about a debtor to anyone, including credit reporting agencies.
• Unfair Practices:
  • Collecting any interest, fee or other charge on top of the amount owed. This is only allowed if the contract the debtor signed to create the debt or state law allows it.
  • Depositing a post-dated check early. Read more below about the dangers of post-date checks.

Warning box: You should avoid giving debt collectors post dated checks. This gives them your bank routing numbers and account number, which can be used by them to access your money in the event a judgement goes against you.

What Are Debt Collectors Required To Do?

• Provide debtors with the following information within five days of first contact:
  • Mini Miranda warning, this states that the following communication is from a debt collector and may be used to collect the debt. This must be included in all information from a debt collection
  • Identify themselves (e.g the debt collection company name, phone number and address)
  • Amount of debt owed
  • Name and address of creditor the debt is owed to
  • Statement that the consumer has a period of thirty days to dispute the debt, otherwise it will be considered valid.
  • Statement that the consumer may ask for verification of the debt.
    • A consumer must send a verification letter within 30 days of receiving their mini Miranda. All collection calls and letters must stop until the debt is verified in writing. An example of a written verification is a copy of a utility bill with the amount owing.
• Provide confidentiality to debtors. Consumers having debt is considered private information under FDCPA and it’s illegal for debt collectors to disclose this information to anybody, other than those authorized (e.g debtors attorney, spouse, parents or guardians, etc).
  • Letters/Telegrams must not identify the sender as a debtor collector. For example, the envelope must not have the debt collections company name if it includes “debt” or “collection” or any variation thereof. Logos are similarly banned if they make any mention of debt collection.
  • Postcards and any other media where it can be seen by others are also banned.

Stopping A Debt Collector From Making Contact

Consumers are able to stop debt collectors from contacting them again. This is done through the following steps:

1. Write a letter asking the debt collector to cease all contact. Sample letter here.
2. Make a copy of the letter.
3. Send the original by certified mail to the debt collection agency.
4. Pay for return receipt (this allows the consumer to know the exact date it arrived which can be used as legal proof).

Debt collectors must not contact a debtor after receiving one of these written requests unless it’s for one of the following two reasons:

1. They are confirming that all contact will cease
2. They plan on taking a specific course of action: e.g filing a lawsuit. They must have actual plans to follow through with this specific course of action, it may not be used as a threat.

How To Report Debt Collectors Breaking FDCPA

If you suspect a debt collector is breaking the FDCPA consumers have have several options.

• Report the violation to the FTC (877) FTC-HELP
• Report the violation to the State Attorney General’s Office
• They can obtain an attorney and sue for damages in court

It’s usually best for consumers to report the violation to the state attorney general’s office first, this is because there are a number of state specific debt collection laws and they will best be able to advise consumers their rights. A full list of attorney generals can be found here.

Penalties For Debt Collectors

The maximum penalties for individual and class actions vary. We’ve listed the maximums for each below:

Individuals may sue debt collectors for:

• Up to $1,000
• Lost wages
• Medical bills
• Attorney fee’s
• Court costs

Class actions lawsuits may sue debt collectors for:

• Damages of up to $500,000 or 1% of the companies net worth (whichever is less)
• Attorney fee’s
• Court costs

Advocates have complained that the penalties are too low now, having been set in 1977. For reference, $1,000 from 1977 is worth $3,863.84 and $500,000 is worth $1,931,922.44 in 2013 according to the Bureau of Labor & Statistics’ inflation calculator.