The Fair Debt Collection Practices Act was enacted in 1977 in order to curtail abuses by debt collection companies. The act provides protections to consumers against harassing tactics, empty threats, telephone contact and dissemination of credit information by third-party debt collection companies. It also provides remedies to individuals who have had their rights violated regarding these matters.
To Whom Does the Law Apply?
The Fair Debt Collection Practices Act only applies to third-party debt collectors. Many of these entities are debt collection agencies. Debt collectors are commonly hired by the original creditor and are often paid by commission based on the amount of payments they bring in from past-due accounts. Some debt collectors purchase debt accounts from the original lenders for a deeply discounted rate off of the original value of the debt. In this scenario, the debt collector becomes the new owner of the debt and assumes the right to collect the debt that was owed to the original creditor.
Because this act only applies to third parties, in-house collection departments are excluded from the provisions under the law. Banks, retailers and other issuers of credit may have a department or division that solely focuses on debt collection.
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If a customer misses payments, the debt may be referred to such a department or division.
According to the Fair Debt Collection Practices Act, a debt collector must inform debtors of their right to dispute the debt when the debt collector first contacts a consumer. Additionally, the debt collector must inform the consumer of the amount of debt that he or she owes on the account that and the original creditor’s name. The debt collection agency must also inform the debtor that if he or she does not dispute the debt within 30 days, the debt will be considered valid. If requested, the debt collection agency must provide verification of the debt. This information may be delivered via the phone call or through the mail within five days of the first phone contact.
Disputing a Debt
If a consumer receives information from a debt collector that he or she believes to be incorrect, he or she can write the collector a letter asking the debt collection agency to verify the debt. Such a letter must be sent within 30 days from the initial contact between the debtor and the debt collector. Until the collection agency verifies the debt, collection calls and other contact must cease.
Once the debt collector receives the request, it must provide the consumer with information that helps to identify the debt. If the debt collector is unable to provide such verification, it must cease its attempts to collect the debt.
While a debt collector may call a consumer in an attempt to collect the debt, some actions are barred. For example, the debt collector may not contact consumers before 8 a.m. or after 9 p.m., unless the consumers have agreed to such contact. Additionally, if you inform a debt collector that you cannot receive phone calls of that nature at work, the debt collector may not contact you there.
If a consumer does not want a debt collector to contact him or her anymore, the consumer can write a letter to the collector making this request. The debt collector can still contact the consumer in two situations. The first is to notify the consumer that it has received the request and no further contact will ensue. The second is to inform the consumer that it plans to take a specific collection action, such as filing a lawsuit for recovery of the debt.
Additionally, if a debtor sends a letter stating that he or she does not owe the debt or some portion of it, the debt collector must cease contact with the debtor. Likewise, if the debtor asks for verification of the debt, the debt collector must cease contact during that time period. However, once the debt is verified, the collector can commence contacting the debtor again.
Contacts with Others
Debt collection companies are permitted to contact third parties about your debts, such as coworkers, neighbors or family members. However, the contact must be limited, such as only asking for a current phone number, address or place of employment. Additionally, collectors are often prohibited from contacting these third parties more than one time. However, debt collectors are not allowed to discuss your debt with such third parties, unless they are a spouse or the debtor’s attorney.
If the debtor is represented by an attorney, the collector must contact directly with the attorney. Abused consumers can seek statutory damages by filing a personal lawsuit or joining in a class action lawsuit against a particular debt collection agency.