By Douglas A. CrowderCopyright © 2007. All Rights Reserved The purpose of this article is to provide information to reduce creditor harassment. No one can totally eliminate creditor harassment. Although the Fair Debt Collection Practices Act (FDCPA) prohibits abusive, deceptive, and otherwise improper collection practices by third-party collectors, this law is frequently violated. Moreover, creditors are generally exempt when they are collecting their own debts. The Federal Trade Commission (FTC) has an ongoing effort to curtail abusive, deceptive, and unfair debt collection practices, which have been known to cause various forms of consumer injury, including emotional distress, invasions of privacy, and the payment of amounts that are not owed, severely hampering consumers' ability to function effectively at work, and placing consumers deeper in debt.
SUMMARY OF FTC REPORTS TO CONGRESS, 2003-2007
Each year, the FTC provides a report to Congress on the administrative and enforcement actions it has taken under the FDCPA during the past year [These reports are available at http://ftc.gov/ In the search engine at the top of the home page, type in "FTC annual report 2003" (or whatever year you want)] For purposes of this article, the reports from the most recent five year period, including 2003 through 2007, were examined
In each of these years, the FTC noted that it received more complaints against third party debt collectors than against any other industry. The number of complaints against bill collectors has continued to increase, both in absolute numbers and as a percentage of all complaints filed by consumers with the FTC.The FTC Annual Reports divide complaints against bill collectors into eight categories of violations. For the last four available years, 2004-2007, the order in which these complaints occurred was the same. In 2003, as will be discussed below, the same eight categories were listed, but the order was slightly different.
For 2004-2007, the top FDCPA violations are:
One: DEMANDING A LARGER PAYMENT THAN IS PERMITTED BY LAW
These complaints allegations that a collector is attempting to collect either a debt the consumer does not owe at all or a debt larger than what the consumer actually owes, and demands for debts that have been discharged in bankruptcy.
Two: HARASSING THE ALLEGED DEBTOR OR OTHERS
This includes collectors calling repeatedly or continuously, using obscene, profane or otherwise abusive language, calling before 8:00 a.m., after 9:00 p.m., or at other times that were known to be inconvenient for the consumer.
Three: THREATENING DIRE CONSEQUENCES IF CONSUMER FAILS TO PAY
This category involves the use of false or misleading threats of what might happen if a debt is not paid. These include threats to initiate civil suit or criminal prosecution, garnish salaries, seize property, cause job loss, have a consumer jailed, or damage or ruin a consumer’s credit rating. Such threats violate the Act unless the collector has the legal authority and the intent to take the threatened action.
Four: IMPERMISSIBLE CALLS TO CONSUMER’S PLACE OF EMPLOYMENT
A debt collector may not contact a consumer at work if the collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such contacts. By continuing to contact consumers at work under these circumstances, debt collectors may put the consumers in jeopardy of losing their jobs.
Five: REVEALING ALLEGED DEBT TO THIRD PARTIES
Third-party contacts for any purpose other than obtaining information about the consumer’s location violate the FDCPA. Even collectors calling to obtain location information are prohibited from revealing that a consumer allegedly owes a debt. Complaints received by the FTC include allegations that third-party collectors contacted their employers, relatives, children, neighbors, and friends, and informed them about their debts, and in some cases, called a third party repeatedly to obtain location information about the consumer. Third-party contacts typically embarrass or intimidate the consumer who allegedly owes the debt and are a continuing aggravation to the third parties. Contacts with consumers’ employers and co-workers about consumers’ alleged debts also jeopardize continued employment or prospects for promotion. Relationships between consumers and their families, friends, or neighbors also may suffer from improper third-party contacts. In some cases, collectors reportedly have used misrepresentations as well as harassing and abusive tactics in their communications with third parties, or even attempted to collect from the third party.
Six: FAILING TO SEND REQUIRED CONSUMER NOTICE
The FDCPA requires that debt collectors send consumers a written notice that includes, among other things, the amount of the debt, the name of the creditor to whom the debt is owed, and a statement that, if within thirty days of receiving the notice the consumer disputes the debt in writing, the collector will obtain verification of the debt and mail it to the consumer. Many consumers who do not receive the notice are unaware that they must send their dispute in writing if they wish to obtain verification of the debt.
Seven: FAILING TO VERIFY DISPUTED DEBTS
The FDCPA also provides that, if a consumer submits a dispute in writing, the collector must cease collection efforts until it has provided written verification of the debt. Many consumers told the FTC that collectors ignored their written disputes, sent no verification, and continued their collection efforts. Other consumers reported that some collectors who did provide them with verification continued to contact them about the debts between the date the consumers submitted their dispute and the date the collectors provided the verification.
Eight: CONTINUING TO CONTACT CONSUMER AFTER RECEIVING “CEASE COMMUNICATION” NOTICE
The FDCPA requires debt collectors to cease all communications with a consumer about an alleged debt if the consumer communicates in writing that he wants all such communications to stop or that he refuses to pay the alleged debt. This “cease communication” notice does not prevent collectors or creditors from filing suit against the consumer, but it does stop collectors from calling the consumer or sending dunning notices. Many consumers complained that collectors ignored their “cease communication” notices and continued their aggressive collection attempts.
FTC ACTIONS TO PREVENT ABUSIVE PRACTICES
In each of its annual reports, the FTC has described actions it has taken in its “ongoing effort to curtail deceptive, unfair and abusive debt collection practices.” There are two main prongs of the FDCPA program: (1) Enforcement, and (2) Consumer and Industry Education. (Prior to 2004, Education was the first prong and Enforcement was second).
First, a Staff Commentary on the FDCPA, which provides a detailed analysis of every section of the Act and serves as valuable guidance for consumers, their attorneys, courts, and members of the collection industry. This is available at http://www.ftc.gov/os/statutes/fdcpa/commentary.shtm.
Next is a brochure entitled "Fair Debt Collection," which explains the FDCPA in plain language This is available at http://www.ftc.gov/bcp/conline/pubs/credit/fdc.shtm
Third, the FTC provides a Consumer Response Center (“CRC”) at 1-877-FTC-HELP. A large percentage of consumer contacts with the FTC relate to debt collection. For those consumers who complain about the actions of third-party collectors, the CRC contact representatives provide essential information about the FDCPA’s self-help remedies, such as the right to obtain written verification of the debt and the right to demand that the collector cease all communications about the debt. The CRC representatives also record information about debt collectors, both third-party and in-house, who are the subjects of complaints, enabling the Commission to track patterns of complaints for use in its enforcement initiative.
COMPLAINTS AGAINST CREDITORS’ IN-HOUSE COLLECTORS.
The FTC also reports the number of complaints it receives about creditors that were collecting their own debts. Because these creditors are not generally covered by the FDCPA, some in-house collectors use “no-holds-barred” collection tactics in their dealings with consumers.
While these complaints are on an upward trend, they have not continued a steady rise, unlike complaints against third party collectors. Complaints against in-house collectors were down from the previous year in 2004 and 2007. The following table shows the number of complaints per year against in-house collectors.
Why, one may ask, is it relevant to keep track of complaints against collectors working directly for the original creditor, since they are not covered by the FDCPA? It is because although creditors’ unfair or deceptive practices may not be barred by the FDCPA, they may be barred by the Federal Trade Commission Act. This act declares unlawful “unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce,” and empowers the FTC to initiate legal action to prevent such practices. [11 U.S.C. Sec. 45].
The FTC takes the apparent position that any act that a third party collector is prohibited from doing under the FDCPA is also prohibited for an original creditor to take under the FTC Act For example, in the matter of Applied Card Systems, Inc., the FTC obtained an order prohibiting an original creditor from taking many of the actions that a bill collector would be prohibited from taking under the FDCPA [See order at http://www.ftc.gov/os/caselist/0323040/041008do0323040.pdf.]
The FTC has stated that it “has sued creditors and other entities engaging in illegal collection practices under Section 5 [of the FTC Act] and will continue to do so in the future as appropriate cases present themselves.”
If abusive practices are prohibited for both original creditors and third party collectors, why do original creditors feel they are able to engage in any harassment they want? It has to do with differences in how the FDCPA and the FTC act are enforced. A violation of the FDCPA (only by a bill collector) can be prosecuted in a civil lawsuit brought by any aggrieved consumer OR the FTC. A violation of the FTC Act (by an original creditor or a bill collector) can only be prosecuted by the FTC. A private consumer cannot file a lawsuit based on a violation of the FTC Act.
THE CALIFORNIA FAIR DEBT COLLECTION PRACTICES ACT
If a consumer is among the 12% of the U.S. population who reside in California, or if the creditor has its main office in California, then the creditor is covered by California’s version of the FDCPA, known as Rosenthal Fair Debt Collection Practices Act [California Civil Code Section 1788 et. Seq.]
This law defines "debt collector" as “any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection,” (emphasis added) [Civil Code Sec. 1788.2(c), but excludes, surprisingly enough, attorneys at law. The Act contains virtually all of the same prohibitions on bill collector conduct as does the FDCPA, although worded and organized differently. [See Civil Code Sections 1788.10 through 1788.18].
The first step is to call the FTC at 1-877-FTC-HELP. The FTC may or may not do anything with the complaint. As seen above, the FTC only files a few legal actions against bill collectors every year, but when they do file an action, there are usually huge monetary penalties involved.
Attached is a sample of a complaint form that can be used. A copy of the complaint should also be sent to (a) the Attorney General of whichever state the client resides in, and the state where the bill collector is located, (b) the Better Business Bureau of whichever state the bill collector’s offices are in, and (c) to the original creditor.
Douglas A. Crowder
SAMPLE COMPLAINT TO SEND TO FTC, STATE ATTORNEY GENERAL, BETTER BUSINESS BUREAU AND ORIGINAL CREDITOR
NOTICE OF VIOLATION OF FAIR DEBT COLLECTION PRACTICES ACT
City, State, Zip Code
In Reference To:
Name of Offending Bill Collector
City, State, Zip
To Federal Trade Commission
To Attorney General, State of ____________________
To Better Business Bureau, State of _________________________
To _____________________________ (Original Creditor)
PLEASE TAKE NOTICE that the above named bill collector has violated the Fair Debt Collection Practices Act and/or the Federal Trade Commission Act, by the following:
_____ Demanding a larger payment than is permitted by law
_____ Harassing the alleged debtor or others
_____ Threatening dire consequences if consumer fails to pay
_____ Impermissible calls to consumer's place of employment
_____ Revealing alleged debt to third parties
_____ Failing to send required consumer notice
_____ Failing to verify disputed debts
_____ Continuing to contact consumer after receiving "cease communication" notice
The particulars of said violations are as follows:
(attach additional paper as needed)
CERTIFICATION OF CONSUMER
I state that I have read the foregoing, and believe the same to be true and correct to the best of my knowledge.