MacElree Harvey Resources - Debt Collection: A Regulated Industry

Business Department

As individuals and families go into greater and greater debt, creditors, those who lend money or sell products or services on credit, more frequently turn to specialty organizations to collect the debt.

What many do not know is that debt collectors must abide by federal regulations established under the Fair Debt Collection Practices Act. All consumers should know their rights under the federal law.

The Fair Debt Collection Practices Act (FDCPA) only protects consumers, that is anyone obligated to pay money for goods or services which are primarily for personal, family or household purposes. Therefore, the FDCPA does not govern collection of taxes, criminal restitution, or obligations of businesses or individuals alleged to owe debts incurred in the operation of a business. Further, the Act governs the conduct only of those who use any instrumentality of interstate commerce (that includes telephones, faxes, email, mail, FedEx, etc.) in any business the purpose of which is collection of debts for another. Therefore, a creditor seeking to recover a debt owed to it directly is not governed by the FDCPA. Furthermore, a credit card company which is seeking repayment is not a "debt collector" for purposes of the Act. However, attorneys who regularly collect debts or hold themselves out to be debt collectors are governed by the federal law.

Restricted Communications
The law prohibits a debt collector from discussing a debt with a third party and allows it to only contact a third party one time for the purpose of obtaining location information of the debtor. Further, a debt collector is prohibited from calling before 8:00 a.m. or after 9:00 p.m.; cannot contact a consumer if it is known that the consumer is represented by an attorney; cannot contact a consumer's place of work if the consumer notified the debt collector not to call work; and cannot even contact the consumer if the consumer advises the debt collector, in writing, to cease all communications or that the consumer refuses to pay the debt. Most importantly, the Act prohibits:

harassing, abusive or oppressive conduct, which includes threatening violence or use of criminal activity;

use of obscene or profane language; publishing lists of debtors or advertising the debt;

causing the phone to ring repeatedly for purposes of harassing or annoying the consumer;

placing calls to consumers without meaningful disclosure of their identity as a debt collector;

making false, deceptive or misleading statements;

falsely representing the character or legal status of a debt;

falsely representing himself or herself as an attorney;

stating or implying that non-payment will result in arrest or criminal prosecution;

threatening suit, garnishment or seizure of property without legal ability to do so;

reporting or threatening to report false credit information;

otherwise using unfair or unconscionable means to collect a debt.

Notice Requirements
The Act is specific regarding the kind of notice that a debt collector must provide to the consumer. It includes that each communication must reflect that it is from a debt collector or is an attempt to collect a debt. There are time requirements within which the debt collector must provide to the consumer the amount of the debt, name of the creditor owed, right to dispute the validity of the debt within thirty days and, if disputed, that the debt collector will provide verification of the debt.

Consumer's Rights if FDCPA is Violated
If a debt collector violates the Federal Act, a consumer may sue the debt collector under the Federal Act in state court. In that action the consumer can recover actual damages sustained because of the debt collector's conduct, statutory damage up to $1,000.00, the costs expended to sue the debt collector and reasonable attorney's fees if the action is successful. The debt collector does have defenses if the violation of the Act was not intentional or the debt collector had reasonable procedures in place to prevent such violations. However, once a consumer has established that the Act has been violated, it is incumbent upon the debt collector to prove that the violation was not intentional, was the result of a bona fide error or otherwise is not actionable.

Sources of Information
A consumer can learn more about his or her rights at the websites of the National Association of Consumer Advocates (www.naca.net), the National Consumer Law Center (www.consumerlaw.org), and the Federal Trade Commission (www.ftc.gov) or by contacting a lawyer familiar with the Federal Act.

Every consumer is protected from harassing debt collectors, but that protection is only as good as the consumer's knowledge of his or her rights. If you have questions about a debt collector's behavior or tactics, please contact the offices of MacElree Harvey.

MacElree Harvey
17 West Miner Street
Post Office Box 660
West Chester, PA 19381–0660
p | 610.436.0100
f | 610.430.7885
f | 610.429.4486
e | info@macelree.com

The following article is informational only and not intended as legal advice.
Speak with a licensed attorney about your own specific situation.
© Copyright 2007 MacElree Harvey, Ltd. All rights reserved.

At a glance
Debt Collection: A Regulated Industry

A debt collector is prohibited from calling before 8:00 a.m. or after 9:00 p.m.

A debt collector cannot contact a consumer if it is known that the consumer is represented by an attorney.

A debt collector cannot contact a consumer's place of work if the consumer notified the debt collector not to call work.

A debt collector cannot even contact the consumer if the consumer advises the debt collector, in writing, to cease all communications or that the consumer refuses to pay the debt.