Debtor's Legal Rights With a Third Party Collection Agency
Congress initially passed the Fair Debt Collection Practices Act in 1974 to help consumers against predatory and deceptive debt-collection practices used by third-party, credit-collection agencies. Amended several times and codified in Title 15 of the United States Code, the act establishes the rules of conduct that debt collectors must follow when attempting to collect consumer debts. The act also sets civil and criminal penalties against third-party credit agencies that fail to comply with the act's prohibitions.
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The Act
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The Fair Debt Collection Practices Act prohibits debt-collection agencies from using illegal methods of collecting third-party debts. The Federal Trade Commission administers the act with the assistance of U.S. attorney general. The federal law does not govern all debts and only applies to debts enforced by third-party collection agencies. Thus, creditors who attempt to collect their own debts are not required to comply with the act.
State Laws
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Following the federal government's lead in attempting to control third-party debt collectors from using abusive collection practices, many state governments passed additional consumer-protection laws. In states such as California and South Carolina, debt collectors who fail to comply with the existing federal law face additional state penalties and revocation of their licenses.
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Harassing Phone Calls
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The act provides debtors with legal rights against harassing phone calls and deceptive practices. According to federal law, debt collectors can only make telephone calls between the hours of 8 a.m. and 9 p.m. and may not call friends and relatives. Debt collectors can only contact attorneys of debtors if they know they are represented. Furthermore, upon a debtor's request, debt collectors cannot contact his employer.
Disclosure Requirements
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The act requires debtors to identify themselves immediately upon contact. Debt collectors cannot provide false identifying information by attempting to deceive debtors into believing that they are attorneys or government officials. Debt collectors must correctly state the amount of debt that consumers owe and cannot threaten legal actions that they do not intend to pursue. Debt collectors cannot threaten violence against debtors or use obscene language during their calls.
Validation Notices
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Debtors have a legal right to receive a validation notice within five days after initial contact. Once a third-party debt-collection agency contacts a debtor, the agency has five days to send a written validation notice by mail disclosing the amount of the debt, the name of the party that owns the debt and the nature of the debt. A debtor's validation notice must include what steps a debtor must take to officially dispute the debt.
Penalties
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Debtors have a right to file suit against third-party debt-collection agencies that violate the Fair Debt Collection Practices Act. If debtors prevail in court, they can receive damages of up to $1,000 for each violation or up to $500,000 per class action lawsuit. Alternatively, courts can award fines equal to 1 percent of an agency's net worth.
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