General Practice, Solo & Small Firm DivisionMagazine

 
Volume 17, Number 2
March 2000

MILITARY LAW

THE FAIR DEBT COLLECTION PRACTICES ACT

BY JULIET L. GEE

The federal Fair Debt Collection Practices Act (FDCPA) is the primary federal legislation dealing with unfair and deceptive consumer debt collection practices. It applies to debt collectors who collect consumer debts. It is a strict liability statute, such that debt collectors may be liable for violating the FDCPA requirements without regard to intent, knowledge, or willfulness.

Are You Affected? The FDCPA applies only to the collection of "consumer debts" by "debt collectors." Consumer debts are debts incurred, or alleged to have been incurred, by natural persons in transactions involving money, property, insurance, or services used primarily for personal, family, or household purposes. Dishonored checks written to retailers or to purchase consumer goods or services may qualify as consumer debts. A "debt collector" is a person who regularly collects, or attempts to collect, consumer debts owed or asserted to be owed to others; or a person who uses any instrumentality of interstate commerce or mail in a business whose principal purpose is to collect consumer debts. This is a broad definition that includes not only collection agency employees, but also persons such as property managers who regularly collect overdue rent on behalf of real estate owners. Lawyers who regularly engage in collecting consumer debts are also subject to the FDCPA. Whether a lawyer or a firm is considered to be a debt collector depends, in part, on the volume of consumer debt collection activities in which the lawyer engages. The FDCPA applies only to debt collectors who collect consumer debts owed to another. It does not apply to a creditor who collects debts owed to itself.

Exemptions to the definition of debt collector include: creditors' subsidiaries or affiliates, as long as debt collection is not the entity's principal business; and government employees whose official duties include collecting debts. However, the provisions of the FDCPA relating to threatening communications, harassment, or abuse apply to IRS collection agents.

Prohibited Actions. The FDCPA limits communication with the consumer. In general, a debt collector may not communicate with a consumer at an unusual time or place that the collector knows or should know is inconvenient for the consumer. Thus, if a consumer notifies the debt collector to cease contacting her at work, then such contact must stop. Communication between 9:00 P.M. and 8:00 A.M. is presumed to be inconvenient unless directly waived by the consumer. The debt collector may not communicate directly with the consumer if the collector knows the consumer is represented by a lawyer with respect to the debt and the lawyer's name and address can be readily ascertained. The consumer or his lawyer may waive this protection. Furthermore, if the consumer's lawyer fails to respond within a reasonable time, the collector may contact the consumer. If the consumer notifies the debt collector in writing that she wants further communications to cease or that she refuses to pay the debt, then the collector must cease contact. However, the collector may notify the consumer that the collector or creditor intends to pursue a specified remedy, such as filing suit.

Generally, in prejudgment situations the debt collector may not communicate with third parties in an attempt to collect the debt. Thus, the collector may communicate only with the consumer, the consumer's lawyer, the creditor, and a consumer credit reporting agency. In postjudgment situations, third-party communications are permitted as reasonably necessary to establish a postjudgment judicial remedy, such as the service of a writ of execution and earnings withholding order on the debtor's employer.

The FDCPA prohibits the collector from harassing, oppressing, or abusing any person to collect a consumer debt. Most courts have applied the "least sophisticated debtor" standard in evaluating whether the actions or communications were harassing, oppressing, or abusing. Threats of violence or other criminal means are a violation of the FDCPA. Use of obscene language is prohibited, as is repeated or continuous telephoning of the consumer with the intent to annoy, harass, or abuse. However, repeated mailing of demand letters that comply with specific FDCPA requirements does not constitute abusive conduct.

The FDCPA prohibits false or misleading representations. The collector may not falsely represent or imply that he is affiliated with the state or federal government; falsely represent the character, amount, or legal status of the debt; or falsely represent herself as a lawyer. Although a collection agency may not send computer-generated letters using a lawyer's name, there is no violation of the FDCPA if the lawyer reviewed each debtor file before authorizing the sending of a computer-generated letter. The collector cannot threaten unintended or unlawful action. Mailing an unissued summons and complaint to the consumer constitutes misrepresentation. Similarly, misrepresenting that documents are not legal process forms or misrepresenting that they do not require action by the consumer is a violation of the FDCPA. Using "_____ v. _____" in the communication when no action has been filed may constitute a misrepresentation.

The FDCPA prohibits unfair or unconscionable practices. The debt collector cannot collect an unauthorized amount. The lawyer should check state statutes when he is unsure whether prejudgment interest or attorney fees are allowed. It is also an unfair practice to threaten a lawsuit on a debt that is time-barred or to mail notices to the consumer indicating publicly that a debt is being collected.

The Dunning Notice. The initial oral or written communication with the consumer must contain a notice referred to as a "mini-Miranda." The initial communication should state, "This is an attempt to collect a debt and any information obtained will be used for that purpose." Although the FDCPA only requires this notice in the initial communication, some states require this mini-Miranda in all communications with the consumer. In subsequent communications, the FDCPA requires collectors to disclose that the communication is from a debt collector. These disclosures are required whether the communication is oral or written.

The consumer has a right to obtain validation and verification of the debt. Within five days after initial communication with the consumer, the debt collector must send the consumer a written validation notice stating, among other things, the debt amount and the name of the creditor to whom the debt is owed. The consumer has 30 days to validate the debt before further debt collection activities can take place. Lawyers should check their individual state statutes to determine whether other notices to the consumer are required.

The consumer must be sued in the "judicial district" where the consumer resides or where the contract was signed. In the case of an oral contract, the consumer must be sued in the "judicial district" where she resides. This does not apply to actions against real property, in which case the "judicial district" is that in which the property is situated.

Finally, the FDCPA provides that where the consumer owes multiple debts, the consumer has the right to have a payment applied to a specific debt. The debt collector may not apply a payment to a debt that the consumer disputes.

A private lawsuit under the FDCPA must be filed within one year from the date of the violation. Any person against whom an FDCPA violation is committed may bring suit for actual and/or statutory damages, costs, and reasonable attorney fees. Actual damages include out-of-pocket expenses and emotional distress damages.

Statutory damages of up to $1,000 may be awarded at the court's discretion, whether or not actual damages are awarded. The $1,000 applies to the action as a whole, not to each statutory violation. The debt collector may be relieved of liability if the debt collector demonstrates by a preponderance of evidence that the violation was unintentional and resulted from a bona fide error.

A prevailing plaintiff must be awarded costs and attorney fees. A prevailing defendant may recover costs and attorney fees only if the court finds that plaintiff brought the action in bad faith to harass the debt collector.

State Laws. Many states have counterparts to the federal FDCPA. While they are often similar, they are usually not identical. Lawyers should review their state statute before proceeding to collect on a debt or representing a debt collector or creditor.

Juliet L. Gee is a solo practitioner in El Cerrito, California. She is a member of the Council of the ABA General Practice, Solo and Small Firm Division.

For More Information about the General Practice, Solo and Small Firm Division

  • This article is an abridged and edited version of one that originally appeared on page 16 of GP Solo & Small Firm Lawyer, July/August 1998 (15:3).
  • For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.
  • Website: www.abanet.org/genpractice/.
  • Periodicals: GPSolo, magazine published 8 times per year; Solo, quarterly newsletter; Client Update, subscription client newsletter available at a discount to Section members.
  • Books and Other Recent Publications: Going to Trial, 2d ed.; A Lawyer's Guide to Estate Planning, 2d ed.; The Complete Guide to Divorce Practice, 2d ed.; Preparing Witnesses; An Overview of Federal Consumer Law; Real Estate Closing Deskbook; Applications of Psychology in the Law Practice; Financial Planning for You and Your Clients; Fundamentals of Personal Investing.

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