Fair Debt Collection Practices

If you collect money for your company, the courts will probably hold you responsible for violations of the Fair Debt Collection Practices Act (FDCPA). What follows is a simplified explanation of that law and what you have to do to comply with it.

In 1976 the Federal government passed a law to protect consumers from unfair debt collection practices. This law does not apply to businesses, but sometimes a business is really a consumer and the rules of conduct are designed to foster rational behavior. That is something equally valuable when collecting from consumers or businesses. In this section, we will examine the major points of the law and what you must do to comply with the law when working to collect your money. The law covers five areas of contact with the debtor and defines both acceptable and unacceptable behavior. While the creditor is not excused from compliance with the law because of ignorance of the law, the law clearly states that harassment must be intentional. You are not guilty of harassment merely because you called a debtor twice in one day or even twice in five minutes.

The law applies to you if you are calling to collect money. While the law provides many specific examples, you are a 'debt collector' if you are contacting a debtor by any means for the purpose of obtaining money that is owed from an existing debt.
Skip Tracing. When speaking to anybody other than the debtor, you must let the person know who you are and why you are calling, but you are not to give your company name unless requested and you are limited to what you can say. Here are the rules for asking another person for information about a missing debtor.

• Identify yourself by name.
  
• State that you are correcting location information. You must say that you are calling to verify a location or find a new location for the debtor. You may not give any other details.
  
• If expressly requested, identify your company. You cannot volunteer this information but you must provide it if the person you are calling asks for it.
  
• You may not say that the debtor owes any money. You are calling strictly to confirm an address or find a new address. You are not permitted to provide further information.
  
• You may not call an individual other than the debtor more than once. You may call a second time if you need additional information, but don't make a practice of it. Continual calling of persons other than debtors is considered intentional harassment.
  
• You may not use post cards. Post cards reveal too much information about the debt to the general public.
  
• Your envelopes cannot indicate you are collecting money. You cannot have anything written on your envelopes, nor can you have any logo that might indicate to a reader that the envelope contains material for a debtor.
  
• These rules do not apply to skip tracing you do through other creditors. They are for those calls you make to a debtor's relatives, friends or neighbors. These rules are designed to protect these people from threats and other unfair practices. If your intention is to gather information and you proceed as if that is your intention, you are not likely to have any problems with the skip tracing rules of the law.

Forbidden Communication:

The government does not want a collector to embarrass a debtor by letting others know about the debt. This is based upon some nasty tricks that were once used to help a company collect. For example, some companies took out advertisements in local papers to 'sell debts' and they would list the debts they were selling, including name, address and amount of the debt. Nobody every bought these debts, but many debtors decided it was more important to pay the debts that were advertised than other bills, like the mortgage. Here are the basic items of forbidden communication.

1. You cannot call the debtor during unusual hours. This is generally defined as 9 P.M. to 8 A.M. You can call during this time, however, if you have a reasonable expectation that it is a good time for a particular debtor, such as one who works nights.
   
2. If the debtor is represented by an attorney, you must speak to the attorney. Of course, if you cannot speak to the attorney, you can always litigate.
   
3. You cannot call a debtor to collect personal bills at work, if you know it is not allowed where he works. Most businesses do allow some personal calls, however, and many debtors will tell you when to call them to avoid calls at work.
   
4. You cannot call the relatives or friends of the debtor to collect money. You can, however, call them to verify a debtor's location or to leave a message for the debtor if they answer the phone at the debtor's residence.
   
5. If the debtor says to stop calling, you have to stop. You can still litigate. You can still have the debt reported to the appropriate credit bureau. You can obtain a judgment and have wages garnished or bank accounts emptied. You just can no longer call.
   
6. Well, maybe just one last call. You can make another call to advise the debtor that collection efforts have been terminated. You can also call to tell the debtor about the remedies available to you, such as credit bureaus or litigation. You may also call to tell the debtor you are going to proceed with a particular remedy, such as litigation.

Harassment:

Debtors are constantly threatening to sue me for harassment. It may be my first call. I may have already requested their response to the bill. I may have suggested that I would help them take care of this problem. They consider the call itself as harassment. The government has a narrower view of the term. The following is not allowed.

You cannot use violence or the threat of violence. If you are having difficulty controlling your emotions regarding a particular debt, have somebody else do the collecting. It is illegal for you to even hint at violence. You cannot say things like “I should rip off your arm and stuff it down your throat!” or other more colorful phrases. You may feel that justice would best be served with a baseball bat and brass knuckles. Just don't say it.

You cannot use obscene or profane language. Once again, if you can't control your temper, give the collection to somebody else. It does not matter if you use these words to describe the debtor, his relatives, or the way you feel about traffic on the way to work. It is simply not allowed in a collection call.

1. You cannot make a list of debtors for general distribution. Lists can be made. Every credit bureau in the country has millions of names of their lists. The lists, however, cannot be randomly distributed or used for other than credit checking purposes. The laws are complex on this issue. You will be safe subscribing to a credit service. Just don't try to become one yourself.
   
2. You cannot advertise the debts to coerce payment. You probably wouldn't do this anyway, but breaking the law in a public record is not very smart at all.
   
3. You cannot call a debtor continuously or repeatedly to annoy them. The key word here is ‘annoy’. You can call them repeatedly if they are 'on the other phone' or they 'just stepped out for a moment.' You can't do it with the intent to annoy. Remember, when the debtor says no more calls, you only get one more chance.
   
4. You must tell the debtor who you are. That way, he will know who to complain about. Frankly, it can be a frightening experience to receive calls from an unidentified caller.

The key to avoiding problems relating to harassment is to treat the debtor with basic human respect. If you enter into the collection process believing that the debtor has been devious and has carefully conspired to avoid paying you your hard earned money, you shouldn't be making the call. You won't have much success.

Begin the collection effort with the idea that nobody wants to owe money. It isn't fun. It causes aggravation. It takes up a lot of valuable time explaining why they can't pay. Your job as a collector is to help the debtor resolve these problems by removing the burden of the debt. Philosophical nonsense? Perhaps, but when you enter the collection process with this mind set, you are more likely to think clearly and get paid.

Misleading Representation:

1. You cannot represent your company as in any way related to the Federal or State government. You can't say anything on the telephone that would give the debtor that impression. Your envelopes cannot have any wording, seal or logo that would suggest they were from an official governmental agency. Certainly, you cannot wear a badge or flash credentials when you visit a debtor. Even if you are an official of some level of government, you cannot collect a non-government bill while demonstrating your relationship to a government.
   
2. You cannot misrepresent the debt. You cannot infer that you are a vile mobster who purchased the debt and brag about your 100 percent collection ratio. You cannot say the debt is secured if it is unsecured. You cannot lie to the debtor about the debt.
   
3. You cannot infer that you are an attorney if you are not.
   
4. You cannot threaten action that is illegal. You can't tell a debtor that your crew will come over to remove all the furniture (even if you sold it to the debtor) without the proper court papers. The government considers it unfair to take advantage of a debtor's ignorance.
   
5. You cannot tell the debtor he will lose his right to defense. Every person in the country has the right to a defense in a court of law. This right cannot be signed away. There are contracts that make defense a moot point, but that doesn't matter. Even if the debtor has no case at all, he has the right to a defense.
   
6. You cannot lead the debtor to believe he has committed a crime. It is not a crime to owe money to another person or a company, no matter how much it hurts.

You cannot provide false credit information. If a debt is disputed, you must report it to whatever credit bureau you report to as disputed. It is illegal to report a disputed debt as a charge off or anything other than a disputed debt. Debts that are not disputed may be reported as collection accounts when they are given to an outside collection agency. They will automatically be reported as judgments if you go to court and win your case.

You cannot use a false name. Some businesses have tried to fool a debtor into thinking the debt was being handled by an outside collection agency when it was only moved to an inside collection department with a different name.

1. You cannot represent communications as if they were related to the court. You cannot send a 'letter' that looks like a summons. This little trick probably worked like a charm. Today, the sweepstakes marketing business uses a similar technique in the famous YOU HAVE ONE $1,000,000.00! Somewhere later in the message you are told. That is what your neighbors will say if you are the winner of.... It is a sad truth that there are probably millions of individuals who buy products they don't need or want so they can retrieve their million dollar prize. It works very well, but it is not legal when collecting.

Unfair Practices: The final group of illegal behaviors is defined as unfair practices. You have seen some of this list in earlier sections, but all of these practices are considered unfair when dealing with a debtor.

• You cannot collect interest or other charges not signed for in an original document. We mentioned this earlier in this chapter. If you want to charge for interest, collection fees, or just about anything else, you have to put it into contract form and have the debtor sign it. It can be a customer agreement, purchase agreement or invoice, but the debtor must sign it. If you don't have such an agreement, you cannot legally charge for anything other than the original bill.
  
• You cannot treat a post dated check as anything other than a promissory note. There are strict limits on the time allowed for post dating and how long you can hold a post dated check before it is deposited. In the past, some businesses would take postdated checks, bounce them, then press criminal charges if the debtor didn't replace the check with a certified check.
  
• You cannot call the debtor collect. Why would you want to? It will not help to motivate the debtor to pay the bill. It is meaningless harassment.
  
• You cannot threaten to repossess what cannot be repossessed. You cannot take back what you sold just because a debtor doesn't pay your bill. It would seem fair if you could, but you have to go before a judge who will give you permission.
  
• You cannot communicate with the debtor by post card. You've seen this before. Post cards are exposed for all to read and, in the past, collectors would go to great extent to make them both easy to read and enticing. The theory was to embarrass the debtor into paying the debt. Since all debts are not legitimate, and many are disputed, this is an illegal practice. It tends to declare the debtor guilty by association and only a court is permitted to rule on that.

The Fair Credit Practices law was passed on the premise that a debt is not a debt simply because a creditor says it is a debt. Because these debts are uncertain, it is not fair to publish them. It is also unfair to coerce a debtor into paying a debt that is uncertain by suggesting that the debt is something it is not, or by threatening the debtor.

It may seem that the law gives the debtor an unfair advantage. In the case of a legitimate debt, however, the creditor has ample recourse. If the debtor has assets and you obtain a judgment, you are entitled to go after those assets. It is not a perfect system, but it is effective without the need for a single angry word.