Fair Debt Collection Law

Learn how fair debt collection law can help you protect your rights.

You are reading Debt Collection Answers Chapter 1, part 1. If you did not start at the beginning of this free guide to dealing with debt collectors, please return to the Debt collection Answers introduction.

Debt Collection Answers: Chapter 1

In this first section of Debt Collection Answers, we introduce you to some of the key provisions of the federal Fair Debt Collection Practices Act (FDCPA), which Congress passed to protect consumers when debt collectors contact them. We also provide information about state fair debt collection laws, tell you about the Federal Trade Commission, the federal agency that enforces the FDCPA, and we explain the importance of maintaining good records when a debt collector gets in touch with you. You’ll learn more about dealing with debt collectors and protecting your rights in other sections of this book.

The Fair Debt Collection Practices Act

Congress passed the federal Fair Debt Collection Practices Act (FDCPA), which is part of the federal Consumer Credit Protection Act, to protect consumers from unfair and abusive debt collectors. Although the FDCPA became law in 1978 it continues to be an important and much needed consumer law. For example, according to the FTC, in 2006 it received 69,204 complaints from consumers about third-party debt collectors. Furthermore, it’s likely that many more people had problems with debt collectors but didn’t complain to the FTC.

Given that debt collectors continue to be a problem for consumers today, the opening statement in the FDCPA is as relevant now as it was when the law was passed: 

“There is abundant evidence to 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 privacy.”

The FDCPA mainly applies to personal, family, and household debts, including credit card debts, mortgages, car loans, and student loans. It also applies to bounced checks, medical and insurance debts, unpaid utility bills, unpaid condo fees, and outstanding legal judgments.

Warning: If you are a business owner and you are running your business as a sole proprietorship, your business debts are your personal debts. Therefore, a debt collector is legally entitled to come after your personal assets in order to collect any past due debts your business may owe. However, if this happens to you, you will not be protected by the FDCPA because the law only applies to debts that are exclusively personal debts, not your business debts. Therefore, the law won’t apply if you owe a credit card company for items you purchased for your business or if you can’t pay the personal loan you got from your bank to help finance your business.

Some Debt Collectors Aren’t Covered By the FDCPA

The FDCPA does not apply to all debt collectors. It does apply to debt collectors who are collecting debts for creditors and to attorneys who are hired by creditors to handle their consumer account collections. However, when creditors use their own in-house employees to collect past due consumer debts, those debt collectors usually are not covered by the FDCPA. Also, the law does not apply to federal and state government officers who collect debts for a government agency and it does not apply to non-profit credit counseling organizations either.  

Attorneys Who Collect Debts

Don’t panic if you receive a letter from an attorney about a debt that you owe! Attorneys often help creditors and debt collectors collect consumer debts by writing collection letters for them. Attorneys who regularly collect debts are considered debt collectors under the FDCPA. That means they must abide by the requirements of the FDCPA.

The FDCPA says that collection letters from attorneys must accurately describe the attorneys’ role in collecting a debt and must be truthful about what the attorneys will do if the consumer receiving the letter does not pay up. Attorneys who do not include this information in their debt collection letters or who provide misleading or false information in those letters violate the FDCPA. Some consumers have successfully sued attorneys who did not include the required information, misled them by making it sound as if the attorneys had reviewed their particular case when they had not, or threatened to sue the consumers when the attorneys had little intention of doing so. 

Keep in mind that just because you receive a collection notice from a law office that does not mean you are going to be sued. But if you do receive a legal notice from a collector, and you need advice on what to do, call the Collection Complaint Hotline at 888-711-5183. The consultation is free.

State Debt Collection Laws

Your state may have its own fair debt collection law and that law may provide stronger protections for you and stiffer penalties for debt collectors who violate your rights than the FDCPA does. Also, your state’s law may apply to in-house debt collectors as well as to outside or third-party debt collectors, unlike the FDCPA. In the Appendix of this book you will find a list of the states with their own debt collection laws, together with a phone number for the office of the attorney general in each state. These offices typically enforce their state’s fair debt collection law and can provide you with specific information about the law in your state. However, if you don’t see your state on the list, check with your attorney general’s office or with a consumer law attorney. It’s possible that your state passed its own law after we wrote this book.

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