This paper explains the federal Fair Debt Collection Practices Act (FDCPA) and other laws that apply to debt collectors. This paper will provide information about how to stop calls from collectors and how to correspond with them about your account or to dispute a collection action. This paper also explain one’s right to privacy, and how debt collection efforts may affect your job, your credit report, even information in your medical files. This paper will also reflect from the business owner’s aspect and how debt collection agencies can affect their business, especially if the collection agency is not following the law as they should.

Why are you being contacted by a collection agency? It usually means that a creditor has not received payment from you for several months. They have negotiated with another company or are using an in-house affiliate called a debt collector to attempt to get you to pay. Third party collectors often purchase your debt for less than you owe, and your debt is now owned by the collector. A collector may also work for the creditor in return for a fee or a percentage of any money collected. In-house collectors that are affiliated with the original creditor work on behalf of the company directly. Because the creditor has taken a loss on your account or because you are late with making payments, this negative information may show up on your credit report. Often the first contact with the debt collector is a telephone call from a representative, a prerecorded message asking you to call a mysterious toll-free number, or a letter. When a collector calls or you call back, get as much information as possible. Ask for the name of the caller, the collection agency, the creditor, and the address and fax number for sending correspondence. Also ask about the amount the collector claims you owe. In this first call, you should also tell the caller you expect written follow-up if you have not yet received a notice in the mail.

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Those that are in the business of extending credit have a reasonable expectation of being paid back. Whether a product is delivered with the agreement to pay upon receipt or an individual is issued tens of thousands of dollars in unsecured credit card cash advances, the lender is entitled to being paid back. Every business owner knows the risks involved when they start selling their products or services on credit. Those customers may not intentionally set out to delay paying you, but if you are not careful, you could end up with a rather huge list of accounts receivables. And if those accounts receivables are not paid in a timely fashion, it can play havoc with a business owner’s budget and your cash flow projections. Clearly, there are instances when the lender is not receiving the payments they are due. There can be several reasons for this. Sometimes, the borrower may be experiencing financial difficulties and needs more time to pay their debt. However, at other times, they may simply be irresponsible about paying their debt and they default. Whatever the reason, the lender is fully within their rights to seek and expect payment. Short of saying “cash only” to their customers, what can a business owner legally do to collect debts that are owed to them? How many reminders and late notices can you send out before you find yourself violating the law?

This is where collections agencies come into play. Their goal is to acquire the payment due their clients. However, they may not take a Wild West style approach and do anything they wish to do in order to recoup a debt. This is where the Fair Debt Collection Practices Act also comes into play.

The federal Fair Debt Collection Practices Act (FDCPA) sets the national standard for collection agencies. The FDCPA, enforced by the Federal Trade Commission (FTC), prohibits abusive collection tactics that harass you or invade your privacy. The Fair Debt Collection

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Practices Act was brought into being to address problems relating to harassing and threatening behavior by some debt collectors. Collection agencies do, however, benefit from this legislation. By acting in a professional manner when attempting to collect debts, collection agencies can avoid possible penalties. Generally, the FDCPA only applies to agencies that collect debts for others. However, other federal or state laws may apply to in-house debt collections, as well. Also, the Fair and Accurate Credit Transactions Act (FACTA or FACT Act) requires financial institution creditors to send notice that negative information may be posted to your credit report.

The Fair Debt Collection Practices Act is not a new law as it was first enacted in 1978. However, there have been amendments and modifications to the Act that have altered the law in many ways. For example, a new clause that has been added to the Fair Debt Collection Practices Act is that a borrower that is in collections can request the creditor no longer contact him and the collections representative must cease contact.

This can only occur if the debtor makes this request in writing. You should send such a letter by certified mail and request a return receipt. If the company has a fax number, send the letter by both fax and by mail. If communication has stopped because the collection agency can't reach the debtor, then it is legal to contact third parties in a courteous, non-harassing manner. In addition, the collections rep cannot disclose the nature of the call, so as not to violate the privacy rights of the debtor. While these rules can seem skewed towards the debtor in question, they also help the collection agency steer clear of trouble by engaging in unprofessional conduct. If your first contact with a collector is by telephone, tell the caller that you want all future contact in writing rather than by phone. You can also instruct the collector not to call you at work or at all if that is your choice.

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However, it should be noted that this does not prevent the collection agency from continuing to pursue a valid debt. Collection agencies are still within their rights to let the debtor know of their intention to pursue the debt by other legal means, through an attorney. Another Note- -if you notify the collector not to contact you at all, it is entitled to contact you one more time to explain how it intends to proceed.

As these rules and laws clearly demonstrate, the purpose of the Fair Debt Collection Practices Act is to eliminate unprofessional and abusive behavior on the part of some collection agencies. Such behavior undermines the credibility of the business and also makes it difficult to collect revenues. After all, who wants to deal with collection agencies that are abusive? (From personal experience, I tell you it is not pleasant! Fortunately, I am a person who knows her rights, and I am very quick let creditors know that I know my rights, too.)

Dealing with a debt collector can be one of life's most stressful experiences. Harassing calls, threats, and use of obscene language can drive you to the edge. What's worse, a collector may embarrass you by contacting your employer, family or neighbors. A person may even be hounded to pay a debt that is not rightfully theirs. Sure, collection agencies have a job to do. Even so, there are limits on how far a debt collector can go.

Learn to recognize abusive collection practices. Even if you owe a debt, a collector owes you fair treatment and respect for your privacy. A debt collector cannot:  Call you before 8 a.m. and after 9 p.m. unless you agree; call you repeatedly or use the phone to harass you; trick you into accepting collect calls or paying for telegrams; use

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obscene language, make negative comments about your character, or make religious or ethnic slurs.  Call you at work if the collector knows your boss does not allow such calls.  If you have an attorney, the collector should call that person, not you.

Fair play under the FDCPA also means a debt collector owes you the truth about who it is and what it intends to do. False statements and deceptive practices like the following are not allowed. A collector cannot:

   

Claim to be an attorney or government employee when it is not. Send you documents that look like legal papers when they are not. State that forms sent to you are not legal documents when in fact they are. Say that you committed a crime.

Also, be aware that even if the collector's conduct does not exactly match the language of the federal Fair Debt Collection Practices Act, that collector may still be liable for its conduct. Collection agencies that violate The Fair Debt Collection Practices Act can be penalized in a number of ways, to include legal actions, and up to a revocation of their license. Commonly, fines can be levied against the offending agency. Of course, they are within their rights to appeal these fines.

Public embarrassment and the prospect that your personal information might be shared with others are real concerns when dealing with a collection agency. The FDCPA includes provisions intended to safeguard privacy.

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The FDCPA says discussions about the debt can only be held with (1) the individual, (2) the creditor, (3) an attorney representing one of the parties, and (4) a credit bureau. Public airing of your business intended to shame you into paying a debt is not allowed. Debt collectors:



Cannot exchange (with other agencies) information about individuals who allegedly owe a debt.

   

Cannot distribute a list of alleged debtors to its creditor subscribers. Cannot advertise a debt for sale. Cannot compile a list of debtors for sale to others. Cannot leave messages with third parties, asking them to have the debtor call the collector.

A debt collector can send you mail in care of another person’s name only if you live at the same address or receive your mail at that address. Even when communicating with you directly by mail, a collector is not permitted to use a postcard. The outside of an envelope sent to you by a debt collector should not include language to indicate that the mail is from a debt collector or that the letter relates to the collection of a debt. In short, the collector should take reasonable measure to assure your privacy. For example, if the collector knows that you share your address with others, it may be required to mark the letter "personal" or "private" and not give any outward appearance of the nature of the letter.

The debt collector cannot contact your family members or neighbors concerning your debt if the collector knows your name and telephone number and could have contacted you directly. When contacting your family members including minors or neighbors to find out how to locate you, the collector:
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   

Cannot tell others you owe a debt or discuss details of the account. Must identity himself, (by name, but not as a debt collector). Must identity the name of the collection agency only if asked. Can only contact the party once unless the collection agency has reason to believe the person has new information.



Cannot leave information about a debt on a third party's answering machine or voice mail service.

Contacts with a spouse, the parent of a minor, a guardian, co-signer, executor, or administrator are considered the same as contacts with the debtor under the FDCPA. The FDCPA also says a debt collector may contact someone other than the debtor, but only to learn the location of the debtor. Usually this contact can be made only once, unless the collector has reason to believe the person has new information. If you are a relative or roommate, a debt collector who contacts you repeatedly also violates your privacy. Excessive contact may be considered a form of harassment. You should be able to stop contact by writing to the debt collector. If the collector persists in contacting you, discloses details about the other person's debt, or if the collector's actions have been abusive or threatening, you should complain to the appropriate government agency and seek legal advice. The important thing to remember is that you have the same rights as the debtor, including the right to bring an action for any of the specifics of the law the debt collector has fractured.

If the situation results in a court judgment being entered against you, the FDCPA allows a collector to contact third parties "as reasonably necessary to effectuate a post-judgment judicial remedy." However, according to the Federal Trade Commission, a debt collector may not send a

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copy of the judgment to your employer, except as part of a formal service of papers to achieve a garnishment or other remedy.

The FDCPA actually does not cover all collection actions. Here are a few examples of the types of collections that are not covered:  A creditor that collects its own overdue accounts is not subject to the FDCPA. The law defines "debt collector" as one in the business, the principal purpose of which is the collection of debts due another. But in-house collections are covered by the FDCPA if they create the impression that they are either an independent collector or a governmental agency. State collection laws such as California's may apply to both outside and in-house collection activities. Where they do, the collector so defined is subject to federal law. You would need to consult the laws of the specific state where you reside concerning this particular issue.  A property manager is probably not covered because this person usually works for the property owner. But, an attorney who collects unpaid rent for a property owner is covered if the attorney regularly collects for others.  Government employees whose job is to collect debts as an official duty are not covered by the FDCPA. Student loans and debts collected by the Internal Revenue Service (IRS) are a good example of debts collected by government employees.

However, when the government refers collection of debts to an outside agency, the FDCPA applies. The U.S. Department of Education sometimes refers collection of student loans to an outside collector.

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Even if the government uses its own employees to collect a debt, the agency may adopt internal procedures that follow the FDCPA. The IRS, for example, follows the principles of the FDCPA for in-house collections.

The type of debt, such as a student loan, may affect whether all of the rights you would otherwise enjoy may be afforded you in this particular situation.

Collection of medical debt is a major consumer issue. A recent study by the Federal Reserve Board found that nearly half of all collection actions appearing on consumer credit reports are for collection of unpaid medical bills. HIPAA, the medical privacy rule that became effective in April 2003, allows a health care provider to disclose information to a collection agency. HIPAA also says an overdue bill can be reported to a credit reporting agency.

Collection of an unpaid bill is considered a payment activity under HIPAA. Thus, it is not necessary that you give your consent before a medical bill is referred to a collection agency or before a negative entry is placed on your credit report. A debt collector would generally be a business associate of the covered entity. Although information may be disclosed to a debt collector, HIPAA requires that the minimum necessary standard be applied. This means the doctor or hospital should not give the collector any more information than is necessary to collect the bill.

However, you may dispute a medical bill with the health care provider or a collection agency. If you do, the fact that you have lodged a dispute should also be revealed if a negative report is made to your credit report. HIPAA says the healthcare provider or health plan may disclose only the following information about you to a credit bureau:

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     

Name and address Date of birth Social Security number Payment history Account number Name and address of the one claiming the debt

Of course, the name of the healthcare provider may contain clues to the medical condition of you or members of your family. Recent amendments to the federal FCRA enacted by Congress in 2003, the Fair and Accurate Credit Transactions Act, changed the way medical collections appear in credit reports. The names of healthcare providers must be masked if they would disclose the type of medical condition for which you sought care.

The Fair Debt Collection Practices Act is a complex and lengthy law. Thankfully, it is posted complete and in its entirety online through the Federal Trade Commission website. I highly recommend that every consumer read over The Fair Debt Collection Practices Act in an effort to make sure your rights (as well as your responsibilities) are not violated.

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References
Federal Laws  Fair Debt Collection Practices Act, 15 USC §1692-1692o www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf  Fair Credit Reporting Act, 15 USC §1681 et seq. www.ftc.gov/os/statutes/fcradoc.pdf  Fair Credit Billing Act, 15 USC §1601 et seq. www.ftc.gov/os/statutes/fcb/fcb.pdf  Federal Trade Commission Act, 15 USC §41-58 www4.law.cornell.edu/uscode/15/41.html  Fair and Accurate Credit Transactions Act (FACT) of 2003 Public Law No. 108-159 (December 4, 2003)http://www.ftc.gov/os/statutes/fcrajump.shtm  California Law  Fair Debt Collection Practices Act, California Civil Code §1788, et seq. www.leginfo.ca.gov

Federal Trade Commission www.ftc.gov  Servicemembers Civil Relief Act ( Previously the Soldiers' and Sailors' Civil Relief Act) www.defenselink.mil/ra/mobil/pdf/scra_info-paper.pdf  California Attorney General http://ag.ca.gov/consumers/general.php www.ag.ca.gov/consumers/general/collection_agencies10.htm  State Attorneys General Offices National Association of Attorneys General, www.naag.org  Consumer Protection Offices in the States Federal Government's Consumer Action Web site www.consumeraction.gov/state.shtml  Other Resources o My Fair Debt, www.myfairdebt.com  National Consumer Law Center American Collectors Association Web: www.collector.com  California Association of Collectors Web: www.calcollectors.net

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 National Foundation for Consumer Credit, Inc. Web: www.nfcc.org  Better Business Bureau www.bbb.org

Federal Trade Commission Publications and Links  "Credit and Your Consumer Rights, "www.ftc.gov/bcp/edu/pubs/consumer/credit/cre01.shtm  "Deft Collection FAQs: a Guide for Consumers," www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm  Fair Debt Collection Practices Act Home Page, www.ftc.gov/os/statutes/fdcpajump.htm  FTC Staff Commentary on the FDCPA, www.ftc.gov/os/statutes/fdcpa/commentary.htm  "Using Consumer Reports: What Employers Need to Know," www.ftc.gov/bcp/edu/pubs/business/credit/bus08.shtm  Fighting Back Against Identity Theft (FTC site) www.ftc.gov/bcp/edu/microsites/idtheft/index.html  Resolving Specific Problems" www.ftc.gov/bcp/edu/microsites/idtheft/consumers/resolving-specific-id-theftproblems.html

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