Fair Debt Collection Practices Act: A Brief Overview of Federal Law
In 1978, Congress added Title VIII to the Consumer Credit Protection Act entitled the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq. Congress intended the FDCPA to make certain that ethical guidelines for the collection of consumer debts, and to provide debtors with a means for challenging payoff demands and determining the validity and accuracy of asserted debts. It is difficult to argue with the need for such guidelines: t he Federal Trade Commission provides Congress with an annual report covering its FDCPA enforcement activities and with a summary of consumer complaints of alleged violations of the FDCPA by debt collectors. The FTC reports that in 2005 there were more than 66,000 such complaints.
Congress found, “There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy. ” 15 U.S.C. § 1692(a). The FDCPA implements broad reforms to redress such abuse: we will highlight only a few of them in this article.
“The FDCPA broadly prohibits a debt collector from using ‘any false, deceptive, or misleading representation or means in connection with the collection of any debt.’ 15 U.S.C. § 1692e.” Dunlap v. Credit Protection Ass'n, L.P., 419 F.3d 1011, 1012 (9th Cir. 2005). Additionally, it “‘prohibits unfair or unconscionable collection methods, conduct which harasses, oppresses or abuses any debtor, and the making of any false, misleading, or deceptive statements in connection with a debt, and it requires that collectors make certain disclosures.’” Foti v. NCO Financial Systems, Inc., 424 F.Supp.2d 643, 653 (S.D.N.Y. 2006) (citation omitted). For example, third-party debt collectors may not contact debtors before 8:00 a.m. or after 9:00 p.m., they may not threaten debtors with arrest, and they may not threaten legal action unless such action is truly being contemplated. However, the FDCPA does not prohibit third-party debt collectors from contacting debtors on holidays or weekends unless they know, or have reason to know, that it would be “inconvenient” to the debtor to do so. Indeed, the debtor may demand that the third-party debt collector terminate all communications, though the result of such a demand may well be a lawsuit. Specifically, provided the request is in writing, a debtor may demand that all further communication stop.
The FDCPA also “prohibits a debt collector from contacting a debtor where the collection agency ‘knows’ the consumer is represented by an attorney.” Schmitt v. FMA Alliance, 398 F.3d 995, 998 (8th Cir. 2005) (holding that while knowledge of agent is imputed to principal, knowledge of principal is not imputed to agent).
Finally, the FDCPA “requires debt collectors to notify debtors about their ability to challenge the validity of a debt and to provide other basic information. See 15 U.S.C. § 1692g.” Foti, 424 F.Supp.2d at 653. Specifically, the debtor may ask the collection agency to “validate” the debt by requesting proof that the debt is valid. (This provision has proven quite successful against collection agencies that would buy up “junk” debts and then demand payment from unsophisticated consumers.)
The FDCPA provides for private rights of action, and permits debtors to recover actual damages, statutory damages, and attorneys' fees and costs for violations of its terms. Under the statutory penalty provision, a jury may award up to $1000 for each violation of the FDCPA, regardless of whether the debtor can otherwise establish actual damages. One can easily imagine the significant damages potentially at risk in class action lawsuits alleging violations of the FDCPA.
NOTE: It is important to understand that, generally, the FDCPA only applies to third party debt collectors; the statutory scheme was not intended to cover the conduct of the original creditor. Some states, however, such as California, have enacted consumer protection statutes that provide broader coverage. California's Fair Debt Collection Practices Act is discussed in a separate article.