An Overview of the Fair Debt Collection Practices Act - ABA YLD 101 Practice Series

 

I.     OVERVIEW AND DEFINITION OF “DEBT COLLECTOR”

The Fair Debt Collection Practices Act (“FDCPA”) was enacted to eliminate abusive debt collection practices by debt collectors, insure that the debt collectors who cease the use of illegal debt collection practices are not competitively disadvantaged, and promote consistent state action to protect consumers.  15 U.S.C. § 1692(e) (2009).  It does not apply to those collecting on commercial debts.  Before turning to what the statute prohibits, it is important to understand who the act applies to.

The definition of “debt collector” is key to the FDCPA’s applicability, because the FDCPA’s prohibitions apply only to debt collectors.   The FDCPA defines a debt collector (“Debt Collector”) as “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.”  15 U.S.C. § 1692a(6). 1 Further, a Debt Collector is a person who uses any instrumentality of interstate commerce, or uses the mails in “any business the principal purpose of which is the enforcement of security interests.”  Id.  While the FDCPA defines a Debt Collector as someone who collects the debt of another, any creditor who, in the process of collecting his own debts, uses any name other than his own which may indicate that a third person is collecting such debts is also considered a Debt Collector.  Id.  Attorneys should be aware that an attorney or law firm is a Debt Collector if the attorney or firm “collect[s] debt as a matter of course for clients or for some clients, or collects debts as a substantial, but not principal, part of [his/her/its] practice.”  Schroyer v. Frankel, 197 F.3d 1170, 1176 (6th Cir. 1999); Heintz v. Jenkins, 514 U.S. 291 (1995) (holding an attorney can be a “Debt Collector”).

If the debt collector is not an attorney or law firm, whether he or she regularly collects the debt of another is determined by how often the debt collector collects as opposed to the percent of his or her total time spent collecting debt.  Oppong v. First Union Mortg. Corp., 215 Fed.Appx. 114, 118-20 (3d Cir. 2007); Holmes v. Telecredit Service Corp., 736 F. Supp. 1289 (D. Del. 1990); see also, 17 Am. Jur. 2d 193 (May 2009). 

Section 1692(a)(6) lists those individuals who are excluded from the definition of Debt Collector, such as the creditor itself, an officer or employee of the United States or any State, and a process server. 15 U.S.C. § 1692a(6)(A-F).  Generally, banks which attempt to collect debt owed to them are not considered Debt Collectors.  However, some cases have found banks to be Debt Collectors within the meaning of the FDCPA where the banks regularly collected or attempted to collect debts.  See e.g., Oppong, 215 Fed. Appx. 114 This determination was based on the frequency of attempts to collect and high rate of delinquent mortgage loans.  Id.  Courts have also held that  loan servicers are not Debt Collectors if the loan was transferred for servicing prior to default.   Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985), modified on other grounds, 761 F.2d 237 (5th Cir. 1985).

 II.    WHAT THE FDCPA PERMITS

A Debt Collector may communicate with a consumer in connection with the collection of a debt between the hours of 8:00 a.m. and 9:00 p.m. at the consumer’s location.  15 U.S.C. § 1692c(a)(1).  However, if the Debt Collector knows the consumer is represented by an attorney with respect to the debt, the Debt Collector must attempt to communicate with that attorney.  Id. at § 1692c(a)(2).   If the attorney fails to respond within a reasonable time to the Debt Collector (or if the attorney consents to direct communication with his/her client) the Debt Collector may communicate directly with the consumer.  Id.  A Debt Collector may contact the consumer at his/her place of employment unless the Debt Collector knows or should know such communication is prohibited by the employer.  Id.at § 1692c(a)(3).

If the consumer directly gives the Debt Collector consent, or a court gives express permission, or as reasonably necessary to effect a post-judgment judicial remedy, a Debt Collector may communicate with a third party in connection with the collection of any debt.  15 U.S.C. § 1692c(b).   

III.     REQUIRED PRACTICES

The FDCPA requires that in the initial communication, whether oral or written, with a debtor, a Debt Collector must explicitly disclose that he or she is “attempting to collect a debt and that any information obtained will be used for that purpose.”  15 U.S.C. § 1692e(11). 2  A Debt Collector must disclose his or her identity in all subsequent communications.  Id.  If the consumer refuses to pay the debt or requests no further communication, the Debt Collector must cease communication with the consumer unless the communication is to tell the debtor he or she is (1) ceasing collection efforts, (2) invoking ordinary remedies, or (3) invoking extraordinary remedies.   Id.at § 1692c(c).

A Debt Collector must send written notice to the consumer outlining specific information within five days after their first communication with the consumer designed to allow the debtor time to verify or dispute the debt.  15 U.S.C. § 1692g(a). 

A consumer must dispute the validity of the debt within the thirty-day period or the debt is presumed valid.   Id.  The consumer’s right to dispute the validity of the debt must be conspicuously displayed in the notice.  Terran v. Kaplan, 109 F.3d 1428, 1432 (9th Cir. 1997).  Nothing prevents a Debt Collector from attempting to collect on the debt during the validation period as long as the consumer has not disputed the debt.  Foti, 424 F.Supp.2d at 658-59.  However, a Debt Collector can be subject to liability under the FDCPA for sending a notice to a consumer stating a debt is assumed to be valid when the validation period has not been completed.  Robinson v. Transworld Systems, Inc., 876 F.Supp. 385 (N.D.N.Y. 1995). Importantly, if the notice from the consumer is sent via mail the notification is complete upon receipt.  15 U.S.C. § 1692g.

If the consumer disputes the debt in writing and/or requests the name and address of the original creditor, the Debt Collector must “cease the collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”  15 U.S.C. § 1692g(b).

The FDCPA obligates the initial Debt Collector to comply with the notice requirement upon an initial communication, but does not require a subsequent Debt Collector, attempting to collect on the same debt, to again fulfill the notice requirement.  Senftle v. Landau, 390 F.Supp.2d 463 (D. Md. 2005).  On a given debt there is only one initial communication with the consumer even though subsequent Debt Collectors may become involved.  Id.; see also, 17 Am. Jur. 2d 197 (2009).

 IV.    PROHIBITED PRACTICES

The FDCPA prohibits harassing or abusive, false or misleading, and unfair collection practices.  15 U.S.C. § 1692d-f.  Non-exhaustive lists of behavior that violate the statute are provided in 15 U.S.C. § 1692d-f.

  1. Harassment or Abuse
    Harassing or abusive conduct as defined in 15 U.S.C. § 1692d includes:  (1) the use or threat of violence or other criminal means to harm the physical person, reputation, or property of any person; (2) the use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader; (3) the publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of § 1681a(f) or § 1681b(3) of title 15 ; (4) the advertisement for sale of any debt to coerce payment of the debt; (5) causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number; and (6) except as provided in § 1692b of title 15, the placement of telephone calls without meaningful disclosure of the caller’s identity.  Id. at §1692d. 3       
  2. False or Misleading Representations; Unfair Practices
    The FDCPA defines conduct which constitutes a violation of 15 U.S.C. 1692e as false or misleading representations.  15 U.S.C. 16929e(1-16).  Courts have employed an objective hypothetical “least sophisticated debtor” standard to determine whether a particular action violates the FDCPA as misleading or abusive.

    The FDCPA also provides that a Debt Collector may not use unfair or unconscionable means to collect or attempt to collect any debt.  15 U.S.C. § 1692f(1-8) (providing a non-exclusive list of conduct that violates § 1692f).  
  3. Furnishing Deceptive Forms
    The FDCPA prohibits designing, compiling, and furnishing of any form knowing that the form would “be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.”  15 U.S.C. § 1692j(a).

 V.     ENFORCEMENT AND LIABILITY

A lawsuit for violation of the FDCPA is brought directly against the Debt Collector, and may be brought in any appropriate United States District Court, or any other court of competent jurisdiction. 15 U.S.C. § 1692k(d).  A consumer has one year from the date the violation occurs to bring an action under the FDCPA.   Id.  Equitable relief is not available in actions brought under the FDCPA.

A Debt Collector who violates the FDCPA with respect to any person is liable to that person for actual damages, and statutory damages of $1,000.  15 U.S.C. § 1692k(a).  Higher awards are available in class action cases.  Id.  Attorneys’ fees are also available ( id.), which in many cases may exceed the amount of actual damages, bringing the amount of the judgment to a significantly higher figure.

 


1 Additionally, courts have found that assignees of debts which were in default at the time of the assignments are Debt Collectors.  Scally v. Hilco Receivables, LLC, 392 F.Supp.2d 1036 (N.D. Ill. 2005); see also, Rosenhouse, Michael, What Constitutes “Debt Collector” for Purposes of Fair Debt Collection Practices Act, 173 A.L.R. De. 223 (2001).
2 A voice mail message is considered a communication, Foti v. NCO Finan. Sys., Inc., 424 F. Supp. 2d 643, 657-58 (S.D.N.Y. 2006), but a formal pleading in a civil action is not considered an initial communication for purposes of 15 U.S.C. § 1692g(a), (d).
3 The “meaningful disclosure” obligation is met if the Debt Collector accurately discloses his/her identity and the nature of his/her business, as well as that the communication is an attempt to collect a debt.  Hosseinzadeh v. M.R.S. Assocs., Inc., 387 F. Supp. 2d 1104 (C.D. Cal. 2005).

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About the Author

Stephanie Crane Lieb is an associate attorney with the law firm of Trenam, Kemker, Sharf, Barkin, Frye, O'Neill & Mullis, PA in Tampa, Florida. She practices primarily in area business reorganization, creditor's rights, and bankruptcy. Prior to joining the firm Stephanie served as a judicial law clerk to the Honorable Catherine Peek McEwen, United States Bankruptcy Judge for the Middle District of Florida, Tampa Division.

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