Tuesday, August 16, 2011

The Fair Debt Collection Practices Act

With statutory damages set at $1,000 per violation, plus actual damages and attorneys' fees, the Fair Debt Collection Practices Act ("FDCPA") should be required reading for all general practitioners.  The Act applies to anyone attempting to collect a consumer debt on behalf of another party.  The Act impacts mortgage foreclosures, residential evictions, repossessions, medical debt, and probably about 99% of the cases filed in small claims court.

The Act prohibits several dozen different abusive or deceptive tactics.  They are common sense prohibitions that I don't have time to get into.  Basically don't lie, don't harrass people, don't threaten something that you can't legally follow through on, and don't communicate details of the debt to third parties. But you should still read  the statute because there's a lot of other things that you probably would not have considered.

The more interesting aspects are what the Act requires you to do, not what it prohibits you from doing.  There are several requirements for debt collectors pursuing consumer debts, but I am just going to focus on the very first thing.  Within five days of the initial communication with a debtor, whether it be by phone, in writing, in person, or through a judicial pleading, you must send a written notice to the debtor containing the following information:
(1) the amount of the debt; 
(2) the name of the creditor to whom the debt is owed; 
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;   
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and   
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

Thorough practitioners should have a form letter containing these warnings that will be the initial communication to the debtor.  I have a form letter that I am willing to share.  Let me know if you want a copy.  Although the warnings can be given up to 5 days after the initial communication, it is advisable to make this letter the first communication.  That way you don't run in to timing problems and the debtor can't "misremember" or misconstrue the contents of a telephone conversation as a threat.

I have linked to the entire statute HERE in a pdf.  It is worth printing out and glancing at occasionally.  It is about 20 pages, but the sections are concise and easy to follow.  Like I said earlier, it applies to any consumer debt and the consequences for violation are severe.

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