Make sure you understand crucial debt collection rules before engaging a debt collection firm or collecting debt for another party.
The Fair Debt Collection Practices Act (the FDCPA) was enacted in 1978 and is the most significant and far-reaching regulation that controls debt collection firms. This statute generally applies solely to third-party debt collectors, while in certain jurisdictions it also applies to original creditors.
In other words, whether you’re a debt collector or intend to use an agency to recover overdue money, the FDCPA is a binding statute that you must comprehend. Here’s a rundown of what a collection agency must and cannot do while attempting to collect on a debt.
Table of Contents
What a Debt Collection Agency Is Required To Do:
Identify Themselves: Agencies must specifically notify debtors that they are debt collectors and that any information obtained may be utilized to collect debt. Furthermore, the debt collector must advise the debtor that they have the right to contest the claim. Consider it similar to Miranda Rights for debtors.
Provide the Original Creditor’s Name and Address: This is self-explanatory, but a debt collector must advise the debtor where the debt originated.
Verify the Debt: If a debtor requests documentation of the debt (often a receipt or report), the debt collector must give this proof before continuing efforts to recover payments. It should be noted that the debtor must make this request within one month after the agency’s first contact.
What a Debt Collection Agency Isn’t Able to Do:
Engage in abusive communication. There are several restrictions on how, when, and how often a debt collector may engage with a debtor. A debt collector is unable to:
Contact the debtor before or after 8 a.m. or after 9 p.m.
Contacting the debtor in an obnoxious, harassing, or abusive way is prohibited.
Contact the debtor at his or her workplace (so long as the debtor advises this is inappropriate)
If the debtor has hired an attorney, contact him or her.
Make use of obscene, vulgar, or profane words.
Falsify the debt amount
They misrepresent themselves as a lawyer or a member of law enforcement.
Where appropriate, contact a third party other than the debtor’s spouse or attorney.
Legal action should not be threatened until it is “really intended.”
False information should be reported: It is illegal for debt collectors to provide inaccurate information to credit reporting companies or other businesses. They are also not permitted to threaten to do so.
Broadcast Debtor’s Name: A debt collection agency is also prohibited from publishing the debtor’s name, address, or any other personal information on any “bad debt” lists.
Contact after a validation request or payment refusal: Finally, debt collectors are not permitted to phone, write, or otherwise contact a debtor who disputes or refuses to pay the bill. Although legal action may be taken, continued contact after a rejection is deemed harassment. Similarly, if the debtor asks validation of the debt (often in the form of a receipt or report), the debt collector must give this confirmation before making further contact.
Conclusion
The FDCPA was primarily enacted to protect debtors and consumers against unethical debt collectors. However, most of the restrictions on their behavior are straightforward and reasonable. Debt collectors cannot harass debtors, lie to them, misrepresent themselves or the debt, and must treat the debtor with dignity. Avoiding debt collection should always be your goal, but if you find yourself in need of one, make sure you employ one that is in good standing, knows the FDCPA, and will treat your clients and customers with respect.
