The FDCPA and You
While I work primarily with clients accused of crimes, I also represent people on other matters. One of those practice areas involves people targeted by debt collectors. Today I go over one of the best laws protecting you and me from unscrupulous debt collection practices: The Fair Debt Collection Practices Act.
What is the Fair Debt Collection Practices Act (FDCPA)?
The FDCPA was enacted in 1977 to stop the most serious abuses of third-party debt collectors. The congressional findings, the reason the law was drafted, contains some really nice language including: “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices,” “it is the purpose…to protect consumers against debt collection abuses,” and “means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.” While I’ll be discussing the highlights of the FDCPA I urge you to review the full text of the law here.
Keep in mind that while the FDCPA has been in effect for over 30 years, and was last amended in 1996, stories of abusive debt collection continue to persist today. For example, here, here and here. The problem is not the FDCPA itself (with one exception, see below). The problem is that most consumers simple aren’t aware of the FDCPA and how to use it to protect their rights. So let’s dive in.
When does the FDCPA apply?
The first issue with any law is determining whether it applies to a situation. In some instances this can complicated. Luckily for us, it’s not particularly difficult here. You only need to know three key players:
- Consumer: A person (not a business or other fictional entity) who owes or is alleged to owe a debt. But note the FDCPA only applies to debts acquired for personal or household use. Not, e.g., business loans.
- Creditor: The originator of the alleged debt, the person or business who extended credit to the consumer.
- Debt Collector: The person or business who purchased the debt from the creditor. Technically known as third-party debt collectors because they were not a part of the original debt-creating contract.
The FDCPA kicks in when there is a consumer and debt collector. In other words, the FDCPA has no effect if the original creditor is alleging someone owes a debt. There must be a third party, and the FDCPA only applies to that third party.
One other provision requires that the debt collector’s primary business be debt collecting. This is a somewhat vague provision, and there have been cases attempting to define it in the past. While relevant it’s a somewhat rare issue. I’ve only heard of it coming up when a law firm acts as a debt collector and also engages in other kinds of law. It’s vastly more common for debts to be pursued by pure debt-buying companies.
FDCPA Communication Provisions
As the law itself states, the purpose of the FDCPA is to reduce abusive debt collection practices, which equate to stopping deceptive and harassing practices.
As such, one provision requires the debt collector to inform the consumer that communications are in fact from a debt collector and that all information will be used for that purpose. An example:
The FDCPA permits communication in a variety of mediums, including letters and, ahem, telegrams. Calls are permitted but another provision requires that debt collecting phone calls only be made between 8:00AM and 9:00 PM, and that the phone calls not “harass, abuse, or oppress” those contacted for a debt. The FDCPA lists some non-exhaustive examples of this including: continuous harassing calls, use of profanity, and threats of violence. The fact these examples needed to be listed gives a good indication how bad things used to be.
The FDCPA also prohibits deceptive communication, including that the debt collector represents the government, or that they are an attorney, or that a consumer committed a crime. The debt collector is also forbidden from deceptively characterizing the legal status of a debt, and this one comes up a lot. In Washington the statute of limitations for written contracts is six years. Quite often a debt collector will pursue a claim far past the statute of limitations. This isn’t illegal per se, the debt does exist and the debt collector can attempt to claim it. But what is illegal is saying that the consumer can be or will be sued on the debt if they don’t pay up. Once a claim is past the statute of limitations, the debt collector has no legal leg to stand on.
The FDCPA prohibits debt collector from calling other people, like your family or employer, regarding your debt, except only once and only to get information about your address and phone number. Actual calls to disparage your reputation, or threats to do the same, are illegal.
Debt collectors may initiate a debt collection effort through phone calls. However within 5 days of that initial communication, a debt collector is required to send you written notice of the debt that includes the original source of the debt and the calculation of the number they allege you owe.
If you’re getting sick of debt collectors calling you or sending you telegrams, there are a couple ways to get them to stop.
The self-help method is to send the debt collector written notification that they must cease communication and/or that you will not be paying the alleged debt. This is useful but it’s not absolute.
For one, the debt collector can still contact you to tell you they received the notice, or to tell you they may seek legal remedies, or to tell you they will seek legal remedies. And they don’t have to give you these communications all at on once.
More practically, the debt collector may just sell the debt to another company. That new company is under no obligation to respect your wishes to the previous one, so they can start right up with the phone calls again. Telling them to cease communication may do something, but there are ways around it.
The far, far better route to getting the communication to stop is to get an attorney. The FDCPA requires a debt collector, when they know the consumer is represented by counsel, to only go through the attorney when making communications. The only way a debt collector can contact a consumer after an attorney is involved is to actually sue the consumer. And with an attorney involved, that’s a far less likely scenario. Debt collection is built on a low overhead, volume approach. Serious resistance, attorney resistance, and they’ll often move on to easier pickings. And this requirement applies no matter who has the debt, unlike notifications to cease communication. Once the consumer is represented, all companies will go through the attorney first.
This is one of most important aspect of the Act. The issue here is that sometimes debt collectors call people who really don’t owe any money. This is actually quite common, if a debtor lived at your residence before, or they write a false address on an application, or someone enters the data wrong.
I recall as a teenager, a debt collector called my house asking to speak to some random person. I told them that random person didn’t live there and their response was “are you sure?” I laughed and hung up, and they called a few more times over a week before moving on. It certainly happens.
Debt validation requires the debt collector to prove that 1) a debt exists, 2) you owe it, and 3) you owe it to the person asking for money. All of these are ripe areas for debt defense.
Many debts do not exist in any legal or actual sense. This includes the statute of limitations noted above, or serious issues with the underlying contract or source of debt. For example, if a purchase was refunded, or a contract deemed null, there’s no obligation remaining to collect on.
Obviously, plenty of times a person is accused of owing money that is actually owed by another. There may be a shared address as above, or a shared name, or even a sibling. None of that justifies debt collection efforts against the wrong person of course, but debt collection companies aren’t known for their meticulous research. As I said it’s a volume industry. They don’t really care who pays them as long as someone does.
As for point three, this is where things can get really annoying. Debts are bought and sold in huge bundles. Through the course of these accounts changing hands, records aren’t always updated.
What this means is that sometimes there will be a real debt, and a person will actually owe a debt, but a different company “owns” the obligation. If such a person pays Company X, but the debt actually belongs to Company Y, then Company X just got a free gift and Company Y can keep calling. It’s expensive, and a hassle.
Ideally debt validation will get the company to prove the legitimacy of everything so that if a payment is made, it’s made to the right company and only once. But as a bonus, while the company is verifying the debt they cannot just continue to call. All communication must stop until the debt has been verified or (just as likely) they sell it to some other company. In any event once a request for validation is made, the debt collector must report the dispute to the credit agencies.
Debt validation is powerful but there’s a time limit. The FDCPA requires validation requests be made within 30 days after the initial communication. As a practical matter, you should send the validation request letter certified mail, return receipt requested. The debt collectors’ common move is to say they never received the request (and then your time is up) so keeping a paper trail is very important.
This is the most important part of the FDCPA. If there were no teeth to the law, companies would have no incentive to abide by it. It’s the risk of a lawsuit that keeps a debt collector adhering to the FDCPA.
The general rule for lawsuits is that you must prove an unlawful act, and that the act caused you damages. That’s a tough burden for a normal debt collection case. How do you put a financial value on a debt collector calling you at 7:00 AM?
Anticipating this, the FDCPA offers strict liability to violations of the Act. Instead of having to put a dollar figure on a very difficult metric, the FDCPA simply says a violation costs the debt collector $1,000 plus attorney’s fees. And that is $1,000 per violation, so a string of 7:00AM phone calls will add up pretty quick.
Most debt collectors don’t risk the fines, especially when an attorney is involved. Once again, the debt collecting business is about going after easy money, not having fights with attorneys over debt validation and the like. I consider the penalties an ace in the hole and a reason to resolve the issue, not a money making enterprise. But if indeed the debt collector is reckless or stupid, a consumer can turn it around.
Current Debt Collector Practice
The FDCPA remains relevant but in the decades since it was enacted, the really unscrupulous debt collectors have devised new tricks.
You’ll note the FDCPA doesn’t address actual debt collection lawsuits. This was intentional, as the courts are the proper forum for dispute resolution. But what some debt collectors are doing is suing a consumer, then not notifying them of the lawsuit. Sometimes it’s because they use an old address, or just send it first class mail, or just outright not even attempt service. In any event the consumer doesn’t show up to court and either they’ll lose on the spot (and find out when their wages get garnished) or a warrant is issued for their arrest for contempt of court. Either outcome is serious abuse of process. These tactics are detailed more here.
What’s interesting is that the debt collectors are supposed to prove actual notice to the court the lawsuit was faithfully served. The traditional method is through an affidavit by a process server, signed under penalty of perjury, that the consumer was given notice. But, in a process echoing the mortgage fiasco, these affidavits are being signed by people who have no actual knowledge of whether contact was made. These “robo-signing” affidavits might stop if the courts or legislature upped the penalties for perjury on these affidavits, but for now it’s a real problem.
The FDCPA is a powerful tool for the consumer. It was made to protect the general populace from abusive debt collection practice, and it does a pretty good job of that. While it probably needs updating, the law has always been slow to change. I’m still happy it exists as the first line of defense. If you’re ever contacted by a debt collector, the FDCPA should be the first place you go. And if things are really nasty, get an attorney.