Fair Debt Collection Practices Act (FDCPA) — protecting consumers from abusive debt collectors
In this article we’ll take a dive into the following:
- What is the purpose of the FDCPA
- What is a “debt collector” under the FDCPA
- Who is a consumer under the law
- What debts are covered and not covered under the FDCPA
- What type of conduct is forbidden
- Exactly what is a debt collector required to do
- Examples of illegal conduct related to credit reports
- Examples of illegal actions in collection calls
- Illegal collection letters
- Bad conduct in collection lawsuits
- Advantages and disadvantages of a cease and desist letter
- What does a consumer get out of a lawsuit under the FDCPA
Note: This article will not have specific case references but we will reference the actual text of the FDCPA statute which is 15 U.S.C. Section 1692. You can find the code sections here at the Legal Information Institute.
What is the purpose of the FDCPA?
Why do we even need this law?
Section 1692 tells us right at the beginning of the law:
There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
Really bad things happen to consumers when debt collectors act in an abusive manner.
And state laws are not enough to stop this (1692(b)) — this is certainly true in Alabama where we have little in the way of state laws to help stop abusive debt collectors.
Section 1692c answers the argument that every abusive debt collector makes. They argue, there is no other way to collect debts except by being deceptive and abusive. This law flat out says, “Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.”
Finally, not only was the FDCPA passed and signed into law to protect consumers, but also debt collectors.
Section 1692e tells us that the debt collectors that follow the law will be at a competitive disadvantage. Why? Because there are abusive collectors breaking the law — that gives an unfair advantage over the honorable debt collectors.
I once mentioned to a jury in closing argument that the honorable law-abiding debt collectors are like a football team that has 11 players and follows the rules. But the cheating — abusive debt collectors are like a football team with 13 players who break the rules. It is not fair and the way to stop this is to punish the cheaters so they will play by the rules.
Here is the text of 1692e:
It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.
What is a “debt collector” under the FDCPA
Section 1692a(6) has this definition (leaving out some exceptions):
The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.
Basically two ways someone can be a debt collector.
First, their primary purpose or function is to collect debts. This would be a debt buyer who buys debt in order to collect on it.
Second, they collect debts owed to other companies — this would be like a traditional collection agency.
Basically, the debt has to be in default when it is received by the company that the consumer claims is a debt collector. This would exclude the original creditor.
Note: this can become complicated with various exceptions but the above is a good starting point.
Who is a consumer under the law
Section 1692a(3) defines a consumer as “The term ‘consumer’ means any natural person obligated or allegedly obligated to pay any debt.”
A natural person is a human being.
The next part is critical — “obligated or allegedly obligated” to pay a debt.
So if you actually owe the debt, then you are a consumer.
But what if you do NOT owe the debt and the debt collector says you owe it? Then you are a consumer.
Here’s another way to look at it.
If you owe the debt, then it doesn’t matter what the collector thinks about you. You are a consumer under the FDCPA.
And if the debt collector thinks you owe the debt, then it does not matter whether you do or do not owe the debt. You are a consumer protected by the FDCPA.
What debts are covered and not covered under the FDCPA
Section 1692e(5) tells us:
The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment
The key is the “personal, family, or household” purposes. Here are some examples:
- Medical bills
- Normal household expenses (food, transportation, utilities, entertainment, etc)
An easier way to look at it is what is not covered?
Business-related expenses. So most likely spending money on a business trip will not be considered a “debt” under the FDCPA. A house bought for investment purposes will not qualify.
Just think, “Is this for business/work or is it not?”
Business — most likely not covered.
Non-business — most likely covered by the FDCPA.
What type of conduct is forbidden
The FDCPA prohibits debt collectors from collecting debts in an abusive/harassing manner. In a deceptive manner. Or in an unfair manner.
Section 1692c forbids certain types of contact — when the collector knows it is inconvenient (think shift worker sleeping in day), to a represented consumer (collector should contact the lawyer), or after a cease & desist letter.
Section 1692d focuses on harassing/abusive conduct. Here is the general rule as laid out by 1692d: “A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.”
Next, 1692e says to not be deceptive or misleading when collecting a debt. The general rule is: “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
Finally, 1692f talks about unfair conduct — “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.”
There are many examples given in each section but the take-home message is this for debt collectors:
- It is fine to collect debts
- But don’t harass
- Don’t be abusive
- Collect without lying or deceiving
- And don’t be unfair in how you act
Pretty common sense — be a good person — but abusive collection is so widespread that Congress had to put this in the law books to explain to collectors to act right.
Exactly what is a debt collector required to do
A collector must send you, after the initial communication, a proper Section 1692g notice:
(a)Notice of debt; contentsWithin five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—(1)the amount of the debt;(2)the name of the creditor to whom the debt is owed;(3)a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;(4)a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and(5)a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
If the collector sues you, then Section 1692i tells us the only two locations you can be sued:
(a)Venue Any debt collector who brings any legal action on a debt against any consumer shall—(1)in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or
(2)in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity—(A)in which such consumer signed the contract sued upon; or(B)in which such consumer resides at the commencement of the action.
You can be sued in the county where you signed the debt or where you live. Now if this is a foreclosure, etc. involving real property, then naturally the suit is in the county where the property is located.
The reason for 1692i is to force the collector to be fair to you in the location of the lawsuit. It is unfair to sue you 300 miles away from where you lived or where the contract was signed. So if you signed a contract in Baldwin County, and you live in Mobile County, it is a violation of the FDCPA to sue you in Madison County.
Examples of illegal conduct related to credit reports
Here are some typical examples of illegal credit reporting by collectors.
- Reporting an account you do not owe
- Reporting an account you owe but putting at a higher balance that you actually owe
- Refusing to show the account at a zero balance after settling the account
- Showing a balance owed on a discharged (bankruptcy) debt
- Noting that you are in foreclosure when you are not
- Showing late notations when you were not late
- Not showing the account as disputed when you have actually disputed it
The simple rule is to look at any and all credit reporting by a debt collector. Is it true or false? Correct or incorrect? If it is false, then this will almost certainly be an FDCPA violation.
Examples of illegal actions in collection calls
Collection calls often violate the law. Let’s look at some examples.
- Using profanity against you
- Lying or being deceptive
- Using racial or ethnic slurs
- Yelling at you or insulting you in the calls
- Telling you how your mother would be so embarrassed at being a terrible mom raising such an irresponsible child
- Calling third parties (i.e. not you or your spouse) and talking to them about you or the debt. Only exception is to get location information — home phone, home address, and place of employment.
You get the idea — when it is abusive or lying or unfair — then it almost certainly violates the FDCPA.
Examples of illegal collection letters
Here are a few examples:
- Collecting on a debt that is outside the statute of limitation without warning you that a payment could restart the time period for you to be sued
- Collecting interest or other fees when not allowed to by the contract or the law
- Threatening to credit report after the time period is over for credit reporting
- Lying about who owns the debt
- Lying about what will happen if you don’t pay
- Being unfair — for example, it is dated July 15 and only gives you until July 17 to pay and you receive it on July 19.
As with other examples, always look at the letter and see if it is true? Is it accurate? The letter harassing or unfair in any way?
Examples of bad conduct in collection lawsuits
You can be sued when you do not owe any money.
Or you are sued for more than the amount you supposedly owe.
The collector (debt buyer) can sue with no intention of proving its case but just trying to get a default judgment from you.
When you win your case, the debt buyer can be credit reporting even though you have proved you owe the debt collector nothing.
We also sometimes see debt buyers suing you in the wrong county. Under Section 1692i you can only be sued in the county where you signed the contract or you live. Often collectors will sue you in a different county to discourage you from responding to the lawsuit.
There are many ways the collectors and debt buyers dream up to violate the law — you simply examine each act and see if it was abusive/harassing, deceptive, or unfair.
Advantages and disadvantages of a cease and desist letter
A cease and desist letter is a letter telling the collector you are not willing to pay and/or to not contact you again.
Here’s the law at Section 1692c(c):
(c)Ceasing communicationIf a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except—
(1)to advise the consumer that the debt collector’s further efforts are being terminated;
(2)to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3)where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.If such notice from the consumer is made by mail, notification shall be complete upon receipt.
But here are some of the disadvantages:
- You may get sued since the collector can’t call you anymore
- The debt collector may simply send the account to a new collector and that new collector is not bound by your cease and desist letter
- If you are dealing with an abusive collector, let them break the law so you can sue them under the FDCPA rather than having to deal with an endless stream of collectors.
If you do send the cease and desist letter, do it by certified mail so you can prove the collector received it.
What do you do if the collector continues to contact you after a cease and desist letter? You sue under the FDCPA.
What does a consumer get out of a lawsuit under the FDCPA
You get a number of benefits.
First, you stop abusive debt collection.
Second, you can recover statutory damages of up to $1,000 even if you were not harmed by the abusive debt collector.
Third, you can receive money damages for “compensatory” damages. These are to compensate you for any economic loss. This could be that you lost your job because of the collector) or you paid a higher interest rate because of false credit reporting, etc. And you can receive damages for emotional distress — mental anguish.
Fourth, you can have your lawyers receive attorneys fees paid for by the abusive debt collector.
What to do if you have questions and you live in Alabama
You have done the first step which is to learn about your rights.
Now you need to take action if you are dealing with an abusive debt collector.
Call us at 205-879-2447 and we will be happy to go over your options including suing the abusive debt collector under the FDCPA and under Alabama state law.
Talk to you soon!