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The Fair Debt Collection Practices Act

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  1. The Fair Debt Collection Practices Act Your MEGA Review of the FDCPA Minnesota Collection Network Fall Conference David Cherner ACA International

  2. Legal Disclaimer This information is not to be intended as legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own legal counsel.

  3. Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (FDCPA) became federal law in March 1978. The FDCPA is part of the Consumer Credit Protection Act that also includes: • Truth in Lending Act • Equal Credit Opportunity Act • Fair Credit Reporting Act

  4. Purpose & Benefits • Protects consumers • Benefits ethical collectors • Sets a professional standard • Fosters a fair and competitive environment

  5. Who Must Comply? • Third-Party Debt Collectors • Debt Purchasers Collecting on Purchased Debt • Attorneys • Creditors in limited circumstances • Use name other than your own

  6. What is Debt? • Any obligation or alleged obligation • Of a consumer • Arising out of a transaction • Primarily for personal, family or household purposes • Student Loans? YES!

  7. FDCPA Areas of Risk:Communications • Communications with Consumers • Oral Communications • Mini-Miranda: “This is an attempt by a debt collector to collect a debt. Any information obtained will be used for that purpose.” • Overshadowing • Hours allowed to contact

  8. FDCPA Areas of Risk:Communications • Communications with Consumers • Written Communications • Validation Notice • Verification • Mini-Miranda • Overshadowing • Electronic Communications • E-mail • Web site • Caller ID

  9. FDCPA Areas of Risk:Disputes • Oral Disputes • No duty to verify debt • BUT, have a duty to report debt as disputed to consumer reporting agencies • Written Disputes • Triggers duty to provide verification if: • In writing, received during 30 day validation period • BUT note ACA’s Code of Ethics

  10. FDCPA Areas of Risk:Communications • Communications with Third Parties • Authorized • Spouse • Attorney for consumer • Parent for minor consumer (sometimes) • Guardian • Executor/administrator • Attorney for creditor or debt collector • Unauthorized • Creditor counselors, power of attorney, employers

  11. FDCPA Areas of Risk:Prohibited Practices • Harassment or abuse • Threatening violence • Using profane language • Repeated & continuous calling • Meaningful disclosure of identity • False or misleading representations • Misrepresenting amount or status of debt • Failing to communicate debt is disputed • Unfair Practices • Improper adding of fees or interest • No communicating via postcards

  12. FDCPA Areas of Risk:Liability • Strict liability statute • Actual damages • Unlawful collection charges or interest, lost wages • Statutory damages (don’t need actual damages) • Capped at $1,000 per action • $500,000 or 1% of collector’s net worth in class action • Court costs and reasonable attorneys fees for successful action

  13. FDCPA Areas of Risk:Bona Fide Error • There is a violation, but no liability if: • Violation was unintentional; • Violation resulted from bona fide error; • Violation occurred despite procedures reasonably adapted to avoid such errors. • Debt collector has burden of proof

  14. What are Today’s Hot Topics? • Leaving Messages • Amount of Debt • Verification Requests • Bona Fide Error Defense

  15. FDCPA Hot Topics:Leaving Messages • Majority of courts continue to hold: • Messages left for consumers are communications under the FDCPA • FDCPA requires meaningful disclosure of caller’s identity • Message must include disclosure of call from debt collector and mini-Miranda • Catch-22 in that message may be heard by third party • Collection agency must undertake risk management analysis to determine what, if any, message should be left for consumer

  16. FDCPA Hot Topics:Amount of Debt • Collection notices are not required to itemize interest and fees added by the creditor prior to charge-off of the debt • Failure to provide date unpaid interest was calculated and whether interest may accrue may confuse least sophisticated consumer

  17. FDCPA Hot Topics:Verification Requests • Debt collector did not violate the FDCPA by sending verification of the consumer’s debt following receipt of a consumer’s written dispute coupled with a cease communication request

  18. FDCPA Hot Topics:Bona Fide Error Defense • A debt collector’s reliance on a creditor’s information is not a reasonable procedure to avoid future mistakes