Debt collection practice act


Overview: With the intention of getting rid of the harsh methods employed by the collection agencies on the people to make them repay their debts, the Fair Debt Practices Act or FDCPA was passed by the congress. The act puts forward certain guidelines that are to be followed by the collection agencies while they proceed to collect legally allowable debts, thereby providing protection to the borrowers from abusive conducts from the collectors.

 

The debts covered by the Act:

 

The fair practices act generally covers most kinds of debts namely individual and family debts, debts connected with buying vehicles, health and medical care, mortgage loans and financial liability due to purchases made using credit cards. There may be slight variations in the types of debts covered by the law prevailing in the respective states, though by and large the law is similar to the federal law in most of the states.

 

Agencies covered under the act: According to the wordings in the act, a debt collector is a person involved in the process of collecting the debts owed to a third party by the borrower. Attorneys who take up collection services regularly are also seen as debt collectors by the law.

 

Collection agents who work in the company, to which you owe a debt, are not covered by the act in normal circumstances. Only if the company employs an outside agency for the process of collecting debts does the act comes into play.

 

Restrictions enforced by FDCPA:

 

To ensure that fair methods are being used by the collectors while collecting back the debts, the following restrictions are put in place in the collection practices:

 

  • A collection agency should not contact the persons related to the borrower personally but are not responsible in anyway for the debt.

  • The borrower should not be threatened by the agency by way of false threatening, which is making threats about harming the borrowers credit ratings by exposing their account to a lawyer, without the intention of actually doing it.

  • If the collector has been instructed by the borrower that all future dealings connected with the debt should be carried through the attorney that has been appointed by the borrower for this purpose, the collection agency should not contact the borrower directly any longer for matters related with the collection of debts.

  • Calling the borrower at inordinate times or making repeated calls without getting prior consent from the borrower, is disallowed by the law. As per the law, the time between 9pm and 8am is referred to as being unreasonable. Also, the agency should not call the customer during his work if it violates the policy of the borrowers employer, which the agency is aware of.

  • Speaking abusively or using words with the intention of insulting the borrower are strictly prohibited by the act. Also furnishing and issuing fake letters or notifications to the customers in order to cheat him, and threatening him by saying that they will get him arrested if not paid back the debt, are looked upon as serious malpractice.

    • After contacting the borrower for the first time, the collection agency must send a written notice to him, in which the following facts should be clearly mentioned.

     

  • The amount owed,

  • The name of the person or institution to whom he owes money,

  • The fact that if the validity of the debt mentioned in the notice is not disputed within 30 days of the receipt of the notice, the debt will be assumed to be legitimate by the collector;

  • In the event of you disputing the validity of the debt, the collector will incur the proof of the debt and will send the borrower, a copy of it.

  • If requested by you in writing inside 30 days of the receipt of the notice, the debt collector will let you know the details of the original creditor, if it is someone other than the current one.

  • If you send a written letter denying the fact that you owe money to the creditor in question, within the stipulated time, he must not contact you any more. However, he may restart the collection process once he sends you proof that you owe him debt in the form of a copy of the document for the sum of money that is claimed by the creditor.

    • To prevent the agency from contacting you: If you wish so, you may prevent the collection agency from contacting you by sending them a written notice asking them not to contact you in the future. After they receive your letter, they may contact you just one more time to let you know about the measures that they intend to take, connected with your debt. However, it should not be assumed that preventing the collector from contacting you relieves you from the debt. The creditor can still move the court to get back the money you owe.

     

    Penalties for violating the law: If you feel that your debt collector has violated the law, you can file a case against him in the court within a period of 1 year from the day when he violated the law. You are entitled for the compensation for the damages you bore, along with a sum of up to $1,000, and whatever expenses you had for conducting the court proceedings.

     

    Where to report harsh practices of debt collectors• You may report any misconduct from your collectors part to the attorney generals office in your respective state. In case if you are facing trouble from a collection agency that is outside your state, you may contact the Federal Trade Commission in the following address:

     

    Federal Trade Commission

     

    One Bowling Green Ste. 318

     

    New York, NY 10004

     

    1-877-382-4357 (877-FTC-HELP)

     

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