Collecting on your unpaid debts could backfire if you’re not familiar with the Fair Debt Collection Practices Act (FDCPA). This important piece of federal legislation determines how landlords, contractors, and lenders can go about seeking restitution when dealing with debtors. Pursuing a delinquent debt without brushing up on the FDCPA beforehand is sure to end in financial disaster and potential legal trouble.
Want to avoid legal jeopardy when collecting your unpaid debts? Review this history of the FDCPA to ensure you don’t run afoul of the law when hunting down the debtors who owe you money.
Congress & Debt Collectors
The Fair Debt Collection Practices Act originates in the United States Congress, which passed the law in 1978 to protect consumer debtors from collection agencies.
Aimed at preventing debt collection practices that are “abusive, deceptive, and unfair,” this law requires debt collectors to act carefully when seeking the money they’re lawfully owed. While it was largely motivated by a desire to protect debtors, the FDCPA does permit “ethical debt collectors” to seek valid repayments.
Congress had five specific intentions when designing the FDCPA:
- Prevent abusive debt practices that lead to bankruptcy, marital disputes, or violence
- Expand existing laws so that they’re not inadequately protecting consumers
- Clarify which legal and appropriate means of debt collection are available to lenders
- Regulate interstate commerce, a congressional prerogative where much debt collection occurs
- Ensure legitimate debt collectors are not disadvantaged by abusive competitor practices
The congressional effort to enact the FDCPA was thus focused on protecting both debtors and lenders. While debt collectors would have to take certain extra steps to ensure they were legally compliant, they would not be outcompeted by nefarious competitors who were willing to use abusive practices to earn more money.
Collect Unpaid Debts Legally
The FDCPA makes it clear that a debt collector can’t contact a debtor whenever and however they please. There are rules on when and how you can contact those who owe you money.
According to the Fair Debt Collection Practices Act, a debt collector can never employ “any false, deceptive, or misleading representation or means” when collecting a debt. In other words, bill collectors can’t hide their identity, pose as another person, or claim to represent a legitimate financial opportunity when communicating with debtors.
Debt collectors must also take particular care not to represent themselves as attorneys.
Debt collection laws like the Fair Debt Collection Practices Act prohibit threatening any illegal action such as hurting or robbing someone in return for an unpaid debt.
Time is regulated; debt collectors may not legally contact debtors before 8:00 AM or after 9:00 PM. Debt collectors can only contact debtors multiple times if they believe an earlier response was erroneous.
Debtors must always be contacted through any legal counsel they have retained; contacting a debtor personally instead of going through their lawyer can bring about severe legal consequences.
Debtors can also demand that debt collectors terminate any future communication attempts, though debt collection laws require this demand must be delivered in writing for it to take effect. If attorneys fail to respond in a reasonable time period, the debtor may again be personally contacted by collectors, though this is rare.
Debt collectors who seek to avoid being sued should understand that the FDCPA provides consumers with a right of action under certain circumstances. This means that they can take private legal action against those carrying out debt collection if they’ve suffered actual damages, statutory damages, or were forced to pay attorney’s fees.
Third-party debt collection services must never contact debtors at work once they’ve been asked to cease such communication. Using a debtor’s work email, work phone number, or work social media pages to contact them will likely run afoul of debt collection laws.
It’s also imperative to remember that debt collectors cannot spread the word of a debtor’s status to others. Contacting a debtor’s family, friends, neighbors, or coworkers and informing them of the unpaid debt is a violation of the FDCPA and could result in legal consequences.
The Statute of Limitations On Debt
Bill collectors only have a limited amount of time to collect on what they’re owed. According to debt collection laws like the Fair Debt Collection Practices Act, the statute of limitations on debt for claims under the FDCPA is exactly one year from the alleged violation.
This means that creditors who want to sue a debtor under the FDCPA have only one year to make their case. After the statute of limitations on debt has expired, the debt is considered “time-barred” and legally can’t be collected anymore.
“Time-barred” debts cannot be legally collected, but they can still negatively impact a consumer’s credit score. Past-due and “time-barred” debts may remain on credit report(s) for years.
Stick To The Truth
The FDCPA essentially requires third-party debt collectors to stick to the truth whenever approaching debtors. Any use of dishonesty when trying to collect unpaid debts is legally dubious.
Debt collectors can never misrepresent the amount of money that debtors owe, nor can they threaten unrealistic legal consequences if a debt isn’t paid by a certain date. They cannot allege that refusing to pay the debt is a federal felony, or that they possess any legal authority to punish debtors.
While debt collectors are required to answer questions honestly, they can also simply avoid answering questions at all. Still, debt collection laws require that bill collectors provide certain details, such as their name.
Many debtor inquiries can be ignored entirely, leaving debtors to determine answers for themselves.
Nevertheless, debt collectors must always take care to avoid entangling themselves in legal wrongdoing – when in doubt, stick to the truth.
Avoiding Unfair Practices
Bill collectors have many clever ways to get debtors to pay up. Yet unfair practices are now legally prohibited by debt collection laws such as the FDCPA; postdated checks cannot be solicited by debt collectors, and threatening private property if a debt isn’t quickly repaid is illegal.
Instituting fees or interest rates may seem like an appealing way to earn an extra buck off debtors, but it will land debt collectors in legal hot water. Only collect the precise amount owed by debtors, as instituting additional “late fees” or interest rates is expressly prohibited.
The publication of a list of consumers who have unpaid debts is illegal.
Some debt collectors may think that a public website or social media post that “names and shames” debtors is a good idea – in reality, it’s a violation of the Fair Debt Collection Practices Act. Profane or obscene language is also disallowed whenever communicating with debtors.
Bill collectors cannot advertise the sale of a debt to encourage repayment.
This means they cannot publicly or privately offer to sell the debt to someone else, which could be interpreted as a threat to the debtor if they fail to make a payment.
Do not accept postdated checks
Debt collectors should not accept postdated checks as a form of debt repayment if it is postdated by more than five days. Cashing a check that was postdated by more than five days may constitute a violation of the FDCPA and generate a legal headache.
While bill collectors are legally allowed to ask for and accept postdated checks in some circumstances, it is generally advisable to prefer other methods of payment. This will help avoid any violation of debt collection laws.
Calling up a specific phone number over and over again constitutes harassment.
The Fair Debt Collection Practices Act explicitly prohibits calling up a phone number repeatedly. When telephone calls are made, debt collection specialists must clearly identify themselves. Do not call at strange hours or contact a debtor at a work phone number if it can be avoided.
All “false representations” are clearly outlawed under the FDCPA.
The use of a fake badge, uniform, or similar object to present one’s self as an authority figure is illegal. Unfair practices generally refer to anything deceptive or confusing in nature which may confound the average person.
Debt collectors should avoid playing any tricks and simply keep things clean to abide by the FDCPA.
One of the most important elements of the FDCPA is that it requires bill collectors to validate debts.
This means that debtors must be sent a “notice of debts” that includes the following information:
- The precise amount of debt (overrepresentation of how much money is owed is illegal)
- The name/identity of the lender who is owed money
- A statement establishing that the debt will be considered valid if it’s not disputed within 30 days of receipt of the notice
- A statement that the collector will verify the debt and inform the consumer of its verification within 30 days if it should be disputed
- The name and address of the debt’s original creditor if there is currently a different creditor managing its collection
Debt collectors must also take steps to ensure that debt repayments are “in accordance with the consumer’s directions.”
If a debtor has multiple debts, this means that a creditor cannot take repayment for one debt and use it as repayment for another if this is against the consumer’s wishes. That would violate debt collection laws.
When debtors feel as if their rights are being violated, they can make complaints to the CFPB, or simply hire a private attorney and pursue civil legal action.
Upcoming Changes To the Fair Debt Collection Practices Act
Debt collection laws may change over time. Debtors and creditors should be aware that major changes are coming to the FDCPA at the end of 2021.
Consumers are generally gaining greater levels of protection under these forthcoming changes. The bulk of these forthcoming changes are oriented around digital technology, as the original passage of the FDCPA occurred more than four decades ago and didn’t consider modern technologies like email or text messages.
Forthcoming changes to the Fair Debt Collection Practices Act include a greater limitation on phone calls that can be made to debtors. They also limit the ways social media can be used to collect unpaid debts.
They restrict the ability of creditors to contact debtors on major social media platforms, especially if those messages would be visible to the public. Do not leave messages on a consumer’s public Facebook wall.
When using modern social media platforms, any friend requests from debt collectors must include a clear announcement that they’re debt collectors. Consumers are also gaining new rights to opt-out of certain digital communications and cannot be contacted over a work email without consent.
These changes are being driven by the fact that the old Fair Debt Collection Practices Act is incompatible with the digital age. Fewer people are making phone calls and sending letters, preferring emails or texts instead.
According to a report from the California Law Review, the technological means of debt collection have changed drastically while the legal regulations surrounding debt collection have often remained the same.
Fast and Effortless FDCPA Compliant Debt Collection With Hanna & Jarbo
Lenders who are seeking unpaid debts must be particularly careful when employing digital technology to ensure they don’t end up facing a lawsuit from debtors. The experts at Hanna & Jarbo have the unparalleled legal skills needed to avoid such lawsuits in the first place, regardless of whether you need commercial debt collection or consumer debt collection, Hanna & Jarbo has you covered. If you’re not sure of the differences, read our collections comparison article.
Visit Hanna & Jarbo to avoid an expensive and unnecessary violation of the Fair Debt Collection Practices Act. With their help, landlords and contractors dealing with unpaid debts can guarantee repayment without risking legal action.
Contact Hanna & Jarbo today to remain FDCPA compliant while you collect what you’re owed.