Creditors often hire a third-party collection company to help them obtain outstanding balances from debtors. These collections agencies have historically used abusive methods designed to harass and embarrass debtors to try to collect their debt. For example, making calls anonymously, yelling at the debtor, and lying to a debtor were very common.
Eventually, federal legislatures recognized the need to protect consumers from this form of unfair and inhumane behavior, and Congress passed the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692\. The goal of the FDCPA is to eliminate this type of behavior in debt collection. It prohibits debt collectors from using harassment, deception, and unfair practices to collect consumer debt and penalizes them if they do.
The FDCPA restricts the types of actions that debt collectors can take in attempting to collect a consumer debt. Consumer debt is related primarily to “personal, family, or household purposes.” Liabilities resulting from car insurance premiums, homeowner’s association fees, and bounced checks for household supplies are typical examples of consumer debt.
The restrictions on debt collectors’ actions fall into these four general categories:
1. When and how the debt collector can contact the consumer
2. Harassment and abusive actions
3. False or misleading representations
4. Generally unfair practices
Some of the prohibited behaviors by debt collectors include:
• Threatening to physically harm a debtor.
• Making public disclosure of debtor’s identity.
• Harassing a debtor through continuous calls.
• Refusing to identify themselves.
• Threatening legal action that the collector cannot take or does not intend to take.
• Make false statements about the legal impact of failing to pay the debt.
• Sending the consumer documents that appear to be from a court or government agency but are not.
• Contacting a consumer directly if the consumer is represented by an attorney.
• Calling the consumer before 8:00 a.m. or after 9:00 p.m.
• Ignore a consumer’s request that the debt collector provide verification of the debt.
Unfortunately, some debt collectors choose to ignore the FDCPA’s prohibitions and continue to use unfair, intimidating actions of harassment to try to collect a debt. There are penalties for doing so.
The Federal Trade Commission (FTC), the agency in charge of administering the FDCPA, investigates potential violations of the FDCPA. If it determines that a collector is in violation, the FTC can obtain a court order to stop the behavior and to assess financial penalties against the debt collector. It is common for these penalties to reach hundreds of thousands, or even millions of dollars. Consumers can submit complaints about debt collectors who they believe are violating the FDCPA to the FTC.
Another way of penalizing debt collectors for violating the FDCPA is through civil lawsuits brought by the debtors who were subject to unfair collection practices. Debtors can sue the debt collector within one year of the violation. If the debtor proves the violations successfully, they can recover monetary compensation for emotional and physical distress, flat damages of up to $1,000 not tied to showing injury, and attorney fees.
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