By: Javi Calderon
on Thursday, November 11, 2010
An Outline of Debt Collection Laws and Practices
As a consumer or business owner it is important to know and understand the legal limitations of debt collection. There are federal laws in place to protect the consumer from unfair debt collections practices. Being aware of the laws will allow you to protect yourself as a consumer and will provide business owners with guidelines to abide by when attempting to collect debts.
The Fair Debt Collections Practices Act was passed in 1978 as a statute to the existing Consumer Credit Protection Act. The FDCPA is intended to eliminate unscrupulous and abusive debt collection practices, promote an environment of fair debt collection, and provide the consumer with a forum for disputing claims and a method for obtaining secure and accurate debt information.
Obviously, as a business owner and service provider you are completely entitled to pursue funds that are owed to you. However, it is the methods of pursuing your outstanding debts and the ramifications for not adhering to the law that are defined by the FDCPA
. Knowing the limits will keep you in good graces with your customer, lead to more expedient recovery of you funds, and help you avoid legal ramifications that can cost you even more money.
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Improper Debt Collection Conduct
Here are a few of the more prominent prohibited practices outlined by the FDCPA:
• Harassing a consumer via repeated telephone calls with the inherent intent to annoy or intimidate.
• Attempting to reach a consumer at their place of employment.
• Continuing to communicate with a consumer after they have requested verification paperwork.
• Using deception to recover the debt, including misrepresenting the collector as a lawyer or law enforcement officer.
• Seeking payment in excess of the contracted amount.
• Threatening arrest or other legal action unless a legal lawsuit is actually being perused.
• Reporting false or incorrect information to a credit bureau.
• Using abusive or profane language when communicating with a consumer.
• Contacting a consumer outside of the hours of 8 a.m. to 9 p.m.
Correct Debt Collection Procedures
These are the required steps that a debt collector must take when attempting to recover unpaid funds.
1. A debt collection agency must identify themselves and their purpose in every communication, and they must inform the consumer that the information obtained is for the purposes of debt collection.
2. Debt collectors must provide the name and address of the original company or person the debt is owed to.
3. The consumer must be informed of their legal right to dispute the debt.
4. A 1692g 30-day notification must be sent to the consumer within 5 days of the first attempt at communication. The notification must disclose the amount of the debt and the creditor who the debt is owed to.
5. A consumer is entitled to verification of the debt if requested in writing within 30 days of receiving the 30-day 1692g notice.
6. If filing a lawsuit is legal it must be done through proper legal channels.
Enforcement and Individual State Laws
Currently the FDCPA is overseen by the Federal Trade Commission who therefore has the power to administrate punishment for violation of the law. However, as part of President Obama’s massive overhaul of financial regulation procedures the duty of overseeing the FDCPA will soon fall to the new Consumer Financial Protection Agency that is currently being organized.
Many states have a Department of Consumer Affairs for the specific purpose of protecting consumers and regulating certain industries. California
has the strongest consumer protection laws of any state in the US due to dedicated lobbying by consumer and privacy rights interest groups.
Other states like Florida
are also very aggressive, passing legislation that demands that contracts be written at levels of reasonable readability to prevent the general consumer from signing contracts that they can not understand.
As a consumer it is important to understand State and federal consumer protection laws such as the FDCPA to avoid falling victim to unlawful practices. Furthermore, it is important to contact a regulative body such as the Federal Trade Commission if you have been contacted or perused in a manner that is in violation of the law.
As a business owner it’s crucial to know the law so that you don’t align yourself with a debt collection service
that doesn’t abide by them. Not only can you face legal penalties for their actions but their practices will also reflect negatively upon you and your business. Knowing that whoever you hire will in effect represent you with their behavior and methods, research your options carefully and make sure that the debt collection agency you hire strictly adheres to the guidelines set forth in the FDCPA.