Debt Collection Communication Regulations
by Hayden Hodges
Debt collection regulation began as a state issue. In the 1970s, various government agencies collaborated on debt collection abuses, particularly consumer debt collection communications. Accordingly, Congress adopted the Fair Debt Collection Practices Act (“FDCPA”) intending to harmonize consumer debt collection abuse remedies on the federal level. This article surveys those debt collection communication regulations. The FDCPA governs debt collector activities related to consumer transactions and generally defines the following:
- A debt is a consumer’s obligation, or alleged obligation, to pay money from a transaction in which the transaction’s subject is primarily for personal, family or household purposes;
- A consumer is any natural person obligated, or allegedly obligated, to pay a debt; and
- A debt collector is any person or organization using interstate commerce or the mails in any business operating primarily to collect debts owed or asserted to be owed another.
Attorneys, however, were expressly exempted as debt collectors by the FDCPA until 1986 when a statutory amendment eliminated the exemption.
The United States Supreme Court subsequently held that an attorney is a debt collector if the attorney regularly tries to obtain consumer debt payments to another, even if the attorney’s collection activities are limited solely to litigation.
The FDCPA requires debt collectors attempting to collect consumer debts to send the consumer a written validation notice within five days of their initial communication. Such written notice must contain the following information:
i) the debt amount; ii) the creditor’s name; iii) a statement that the debt collector will assume the debt valid unless the consumer, within thirty days after receiving notice, disputes the debt’s validity; iv) a statement that the debt collector will mail the consumer a debt verification and/or a copy of the judgment against the consumer if the consumer notifies the debt collector in writing within the thirty day period that the debt is disputed; and v) a statement that the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor, upon the consumer’s written request within the thirty day period.
Debt collectors should consider drafting clear validation notices so that the most unsophisticated consumers can understand them.
The FDCPA further requires debt collectors to give a “mini-Miranda” notice in the initial written or oral communication to the consumer. The notice must state that the debt collector is attempting to collect a debt and any information obtained will be used for that purpose. All subsequent communications to the consumer must state that the communication is from a debt collector, but this requirement does not apply to a formal pleading made in connection with a legal action.
Remember, debt collection efforts are permissible during the 30-day validation period unless the consumer requests debt verification, at which time the debt collector must cease all debt collection efforts until the consumer receives the verification.
Unless the consumer gives prior consent or a court expressly gives permission, debt collectors may not communicate with i) the consumer if the debt collector knows that the consumer is represented by an attorney and either knows or can readily ascertain that attorney’s name and address, but direct communication from debt collector to consumer is permissible if the attorney fails to respond within a reasonable time or the attorney consents to direct communication with the consumer; ii) the consumer at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer, but a debt collector may assume that communication with the consumer after 8:00 a.m. and before 9:00 p.m. local time for the consumer is convenient; iii) the consumer at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication; and iv) any third parties for any reason other than ascertaining the consumer’s location, except for lawful communications with reporting credit agencies.
Finally, in the rare event that debt collectors, particularly attorneys, are not aware of the fundamental importance of professionalism, the FDCPA clearly states that debt collectors may not use obscene or profane language, the natural consequences of which are to abuse the consumer.
Attorneys beware, you and other debt collectors who violate the FDCPA are subject to liability for i) actual damages; ii) additional damages not exceeding $1,000.00 in the case of an action by an individual; and iii) reasonable attorney’s fees and court costs.
Hayden Hodges, Assistant General Counsel at National Bankruptcy Services, LLC and Of Counsel at Brice, Vander Linden & Wernick, P.C., handles bankruptcy matters. He can be reached at firstname.lastname@example.org.