The Fair Debt Collection Practices Act
If your business extends credit to its customers or allows the purchase of goods and services on account, you should be aware of your customers' rights under the federal Fair Debt Collection Practices Act (FDCPA). The FDCPA requires that debt collectors treat debtors fairly, and prohibits certain methods of debt collection. This article answers commonly asked questions about the FDCPA.
What debts are covered?
Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.
Who is a debt collector?
A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis. Keep in mind that the FDCPA applies only to persons who regularly collect debts owed to someone else, but not to creditors collecting their own debts.
How may a debt collector contact a debtor?
A collector may contact a debtor in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact a debtor at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless the debtor agrees. A debt collector also may not contact a debtor at work if the collector knows that the debtor's employer disapproves of such contacts.
Can a debtor stop a debt collector from contacting him or her?
A debtor can stop a debt collector from contacting him or her by writing a letter to the collector telling them to stop. Once the collector receives the debtor's letter, they may not contact the debtor again except to say there will be no further contact or to notify the debtor that the debt collector or the creditor intends to take some specific action. Please note, however, that sending such a letter to a collector does not make the debt go away if the debtor actually owes the debt. The debtor could still be sued by the debt collector or the original creditor.
May a debt collector contact anyone else about the debtor's debt?
If the debtor has an attorney, the debt collector must contact the attorney, rather than the debtor. If the debtor does not have an attorney, a collector may contact other people, but only to find out where the debtor lives, what the debtor's phone number is, and where the debtor works. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than the debtor and his or her attorney that the debtor owes money.
What types of debt collection practices are prohibited?
Harassment: Debt collectors may not harass, oppress, or abuse a debtor or any third parties they contact. For example, debt collectors may not: use threats of violence or harm; publish a list of consumers who refuse to pay their debts (except to a credit bureau); use obscene or profane language; or repeatedly use the telephone to annoy someone.
False statements: Debt collectors may not use any false or misleading statements when collecting a debt. For example, debt collectors may not: falsely imply that they are attorneys or government representatives; falsely imply that the debtor has committed a crime; falsely represent that they operate or work for a credit bureau; misrepresent the amount of debt; indicate that papers being sent to the debtor are legal forms when they are not; or indicate that papers being sent to the debtor are not legal forms when they are.
Debt collectors may also not state that the debtor will be arrested if the debt is not paid; they will seize, garnish, attach, or sell the debtor's property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or actions, such as a lawsuit, will be taken against the debtor, when such action legally may not be taken, or when they do not intend to take such action.
Unfair practices: Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not: collect any amount greater than the debt, unless state law permits such a charge; deposit a post-dated check prematurely; use deception to make the debtor accept collect calls or pay for telegrams; take or threaten to take the debtor's property unless this can be done legally; or contact the debtor by postcard.
Getting Legal Advice
As a small business owner, you'll want to be clear on the limitations the Fair Debt Collection Practices Act puts upon your company's debt collection practices. Speak with a qualified business and commercial law attorney to find out how to legally collect debt that is owed to you.