Who Is A Debt Collector Under FDCPA?
First, let’s clarify what the FDCPA covers. The FDCPA is specifically about consumer debt collections, not business debt or agricultural debt. The law regulates debt collectors but doesn’t apply to businesses who are collecting debts that originated with them.
The legal definition of debt collector is complicated. In fact, there have been some rulings where businesses did things that turned them into debt collectors. Here are a couple provisions which turn businesses into debt collectors:
- If you do business under one name and perform collections under another name.
- If you buy a debt that’s already in default (e.g. mortgage servicing)
Hiring an outside attorney to collect your debts can put you under the FDCPA’s purview. Even if you are properly collecting debts under your own name, there are still rules that you must follow to avoid getting hit with legal penalties when you try to collect a debt.
Avoiding Harassment Charges
What falls under harassment when collecting a debt? The CFPA has a laundry list of practices, including:
- Repetitive phone calls or calls outside reasonable times
- Calls to an employer when the employer might prohibit it
- Obscene language
- Abusive, slanderous, or violent language
- Publishing a list of those who owe money (except in certain circumstances, e.g., reporting to a credit agency)
- Advertising a debt for sale to coerce payment
- Not identifying yourself
No Misleading
Misleading a debtor is also illegal for anyone who tries to collect, whether or not they are an official collector. You can’t lie about the amount they owe, say that you’re an attorney or a government agency when you’re not, threaten arrest or imprisonment, or make fake threats that you cannot follow through on.
Other misleading practices include:
- Adding additional debts to an existing debt that aren’t allowed by law or in the initial agreement (e.g. collection charges).
- Failing to post payments to a debt on time and then charging late fees to the debtor.
- Lying about whether or not you’ll report a debt or payment to a credit agency.
- Lying about the nature of the debt
- Offering a settlement to waive or forgive a debt and then failing to waive or forgive once the settlement is paid.
This is just the tip of the iceberg for deceptive practices. You can read a longer list in this document about the FDCPA by the Federal Reserve.Steven Jaffe, attorney and co-founder of Farmer, Jaffe, Weissing, Edwards, Fistos & Lehrman, P.L., explains the dangers. "The FDCPA tells collection departments and agencies what they can and cannot do to collect a debt. Violating this law doesn't just cast a negative light on the company. It could get them in legal hot water, especially businesses who do their own collections and aren’t aware of the rules."
Even if you aren’t required to do everything that the FDCPA requires a debt collection agency to do, it may be in your best interests to understand the full scope of the law and follow some of their practices. It will make your debt collection practices much more professional. Still, at a minimum, you need to understand which collection practices are considered misleading or abusive so you can train your collectors how to stay within the law.
