The Fair Credit Collection Practices Act
Sometimes informally referred to as "the Fair Credit Collection Practices Act," the Fair Debt Collection Practices Act (FDCPA) governs the debt collection industry and protects consumers from unethical and abusive debt recovery procedures. All third-party companies collecting debt must adhere to each provision of the FDCPA or face possible legal consequences.
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Significance
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Although a debt recovery agency may have the option to sue an individual and collect the debt through garnishment or property liens, this collection method is usually a last resort since a lawsuit is often an expensive undertaking for a company and the amount awarded may not be enough to merit the costs of filing the lawsuit. Thus, most collection activity takes place via mail or over the telephone. Since a company cannot force a debtor to submit a payment, debt recovery agents may be tempted to harass consumers and use fear as a tool to ensure consumer payments and subsequent commissions. The FDCPA prohibits this practice.
Features
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Additional features of the FDCPA stipulate that a debt recovery agency cannot repeatedly contact an individual via telephone calls or letters if the individual notifies the agency in writing that such behavior is harassing and must cease. Debt collectors may use the debtor's family members, friends and work contacts to locate him, but cannot divulge any details about the company's intentions or the consumer's debt to anyone other than the debtor himself. In addition, debt collectors cannot contact third parties more than once.
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Benefits
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Some consumers pay collection agencies when they aren't certain whether or not they actually owe the amount requested. The FDCPA provides individuals with a method of identifying a collection debt known as "debt validation." Through debt validation, an individual may demand that a debt recovery agency provide him with proof of the debt and the name and address of the original creditor. Until the collection agency provides the information requested, it cannot resume collection activity against the consumer.
Effects
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If a debt recovery agency utilizes collection methods prohibited by the FDCPA, an individual may file a civil suit against the company. Consumers must file a lawsuit within one year of the supposed violation and follow their state's rules of civil procedure in properly notifying the company. Should the consumer win her case, the judge can order the collection agency to pay her damages in the amount of $1,000.
Misconceptions
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Many individuals mistakenly believe that all debt collectors are bound by the FDCPA, but this simply isn't the case. Only third-party collection agencies must adhere to this specific set of laws. If, for example, an individual owes a debt to his credit card company and the credit card company contacts him requesting that he pay what he owes, he does not have the right to demand that the company cease all contact with him. As the original creditor, the credit card company has rights that third-party collection agencies don't enjoy. Should the company sell the debt to another company, however, the new owner of the debt must adhere to the FDCPA when conducting collection activity.
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