There are some legal issues in bill collection that you should be aware of.
The first thing you should know is that there are laws regulating any `third party collector' and, in many cases, creditors. The `Fair Debt Collection Practices Act' (a copy is provided) and a host of local regulations limit the legitimate activities of anyone collecting for, or appearing to collect for a third party. In many states, the federal regulations are also applied to creditors and their debt collectors, and in several states, collection agencies must be registered with the state.
These regulations cover everything from what you must say in your first letter to the debtor, to what you must and must not say on the telephone. If you violate these regulations and the debtor figures it out, they may not only be freed from the debt, but they may successfully recover thousands of dollars!
As an example, one of the bill collectors we work with (let's call him Joe) got an initial letter from a collection agency about an unpaid bill. The letter didn't have the proper words on it, and the bill was already paid. When Joe contacted the lawyer for the bill collector and made the details clear, the lawyer simply asked how many thousand dollars Joe was willing to settle for. Joe said `two', and in a few weeks, had the money.
If you ask any good lawyer, they will also explain that the written laws passed by Congress are refined through the judicial process. In other words, even if you obey the letter of the law, you may be found guilty by a judge based on the `case law', which is the history of the application of the law. One important example is the provision in the Fair Debt Collection Practices Act that states an agency is not responsible for accidental breaches. The courts have consistently held that agencies are responsible even in these cases, although their awards for damages have been based to some extent upon the degree of malice.
One of the major advantages of using / is that we have checked all of our telephone scripts and letters with legal experts to help make certain that they meet the current legal requirements. However, laws and their interpretations change with time, are not uniform in all venues, and are subject to subjective judgments made by people.
If you send our letters, use our phone scripts, and follow the directions in our manual very strictly, it is unlikely that you will have any legal problem with your bill collections, and it is likely that you will efficiently collect unpaid balances without offending debtors.
HOWEVER: The fact that we have checked our letters and scripts with legal experts in this field does not absolve your obligation to obey the law. We explicitly disclaim any responsibility for their use. Read your licensing agreement carefully!!!
Most of the best collection lawyers will help you stay legal for free if you use them for your legal collection cases, because they know that by helping you do a good job, they will have more success in collecting the bills you cannot collect. Check with your lawyer!
If the lawyers are good, they will help you create credit application forms that give you advantages in the collection process, will save you time and money, and help assure that your collections move smoothly. As an example, by placing proper language in your credit agreements, you can assure that the venue for all legal actions is local to you, you can include stipulations by the debtor about how the collection process will operate, you can require the debtor to use arbitration to resolve matters more rapidly than normal, and you can include costs, fees, penalties, and interest that will help defer the costs of pursuing the debt.
Some Helpful Hints for Staying Legal
You must not lie or threaten when you are collecting a bill. Present the facts and describe what will happen if they don't pay. If you lie, you may be liable for fraud or harassment. If you threaten, it can get far worse.
In many states, there are laws requiring specific statements to be made on any attempt to collect a bill. You should familiarize yourself with these laws when you make arrangements with a collection lawyer to handle your cases. We have included standard disclaimers in our letters, but our standard disclaimers may or may not meet the specific requirements of local jurisdictions. Check all the letters and phone scripts with your lawyer before you use them, and get a letter from your lawyer telling you these letters are legally acceptable. Then, if a question ever comes up, you can speak with authority and show that you were prudent.
To print the / letters in your system for the purpose of checking them with your lawyer, use the / print command to print files in the directories under `Letters' and `Scripts' with the `Cap' and `Pro' extensions.
In most states, there are laws about when you are allowed to call people to collect a debt. For example, calling in the middle of the night or on a holiday may violate the debtor's rights. Usually, you can call legally between 10AM and 9PM Monday thru Saturday. In almost all jurisdictions, you may NOT call early in the morning, late at night, or on Sunday.
There may be other issues that vary from state to state. You are responsible for your collection operations.
The text of this act is taken from ``Fair Debt Collection'', by Robert J. Hobbs, which is one of many good books covering the laws in this regard. It is available from the National Consumer Law Center, which is located at 11 Beacon Street, Boston, MA 02108, and includes State regulations, a variety of court cases and findings, and other interesting details of the application of these laws.
1692. Congressional findings and declaration of purpose
a) There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, the loss of jobs, and to invasion of individual privacy.
b) Existing laws and procedures for redressing these injuries are inadequate to protect consumers.
c) Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.
d) Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.
e) It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.
1692a. Definitions
As used in this subchapter:
1) The term "Commission" means the Federal Trade Commission.
2) The term "communication" means the conveying of information regarding a debt directly or indirectly to any person through any medium.
3) The term "consumer" means any natural person obligated or allegedly obligated to pay any debt.
4) The term "creditor" means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
5) The term "debt" means any obligation or alleged obligation of a consumer to pay money arising out of a transaction where the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not whether or not such obligation has been reduced to judgment.
6) The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in any business the principle purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principle purpose of which is the enforcement of security interests. The term does not include:
a) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
b) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts.
c) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
d) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
e) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counselling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
f) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
g) Redesignated (F).
7) The term "location information" means a consumer's place of abode and his telephone number at such place, or his place of employment.
8) The term "State" means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.
1692b. Acquisition of location information
Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall:
1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
2) not state that such consumer owes any debt;
3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
4) not communicate via postcard;
5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney's name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to communication from the debt collector.
1692c. Communication in connection with debt collection
a) Communication with the consumer generally: Without the prior written consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt:
1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o'clock antimeridian (AM) and before 9 o'clock postmeridian (PM), local time at the consumer's location;
2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge or, or can readily ascertain, such attorney's name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or
3) at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.
b) Communication with third parties: Except as provided in section 1692b of this title, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in the conjunction with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.
c) Ceasing communication: If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except:
1) to advise the consumer that the debt collector's further efforts are being terminated;
2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail. notification shall be complete upon receipt.
d) Definitions: For the purpose of this section, the term "consumer" includes the consumer's spouse, parent (if the consumer is a minor), guardian, executor, or administrator.
1692d. Harassment or abuse
A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the forgoing, the following conduct is a violation of this section:
1) The use or threat of use of physical violence or other criminal means to harm the physical person, reputation, or property of any person.
2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.
3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 1681a(f) or 1681b(3) of this title.
4) The advertisement for sale of any debt to coerce payment of the debt.
5) Causing a telephone to ring or engaging in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.
6) Except as provided in section 1692b of this title, the placement of telephone calls without meaningful disclosure of the caller's identity.
1692e. False or misleading representations
A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
1) The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.
2) The false representation of:
a) the character, amount, or legal status of any debt; or
b) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.
4) The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.
5) The threat to take any action that cannot legally be taken or that is not intended to be taken.
6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to:
a) lose any claim or defense to payment of the debt; or
b) become subject to any practice prohibited by this subchapter.
7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.
8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.
9) The use or distribution of any written communication which simulated or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or of any State, or which creates a false impression as to its source, authorization, or approval.
10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
11) Except as otherwise provided for communications to acquire location information under section 1692b of this title, the failure to disclose clearly in all communications made to collect a debt or to obtain information about a consumer, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.
12) The false representation or implication that accounts have been turned over to innocent purchasers for value.
13) The false representation or implication that documents are legal process.
14) The use of any business, company, or organization name other than the true name of the debt collector's business, company, or organization.
15) The false representation or implication that documents are not legal process forms or do not require action by the consumer.
16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by section 1681a(f) of this title.
1692f. Unfair practices
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principle obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector's intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.
3) The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution.
4) Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.
5) Causing charges to be made to any person for communications by concealment of the true purpose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees.
6) Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if:
a) there is no present right to possession of the property claimed as collateral through enforceable security interest;
b) there is no present intention to take possession of the property; or
c) the property is exempt by law from such dispossession or disablement.
7) Communicating with a consumer regarding a debt by post card.
8) Using any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.
1692g. Validation of debts
Notice of debt; contents
a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing:
1) the amount of the debt;
2) The name of the creditor to whom the debt is owed;
3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
5) a statement that, upon the consumer's written request with the thirty day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
b) Disputed debts: If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or the name and address of the original creditor, is mailed to the consumer by the debt collector.
c) Admission of liability: The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
1692h. Multiple debts
If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer's directions.
1692i. Legal actions by debt collectors
a) Any debt collector who brings any legal action on a debt against any consumer shall:
1) in the case of an action to enforce an interest in real property securing the consumer's obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or
2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity:
A) in which such consumer signed the contract sued upon; or
B) in which such consumer resides at the commencement of the action.
b) Nothing in this subchapter shall be construed to authorize the bringing of legal actions by debt collectors.
1692j. Furnishing certain deceptive forms
a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.
b) Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 1692k of this title for failure to comply with a provision of this subchapter.
1692k. Civil liability.
a) Except as otherwise provided in this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of:
1) any actual damage sustained by such person as a result of such failure;
2) a) in the case of any action by an individual, such additional damages as the court may allow, but not to exceed $1,000; or b) in the case of a class action (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith or for the purpose or harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs.
b) Factors considered by the court: In determining the amount of liability in any action under subsection (a), the court shall consider, among other relevant factors:
1) in any individual action under subsection (a)(2)(A), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
2) in any class action under subsection (a)(2)(B) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional.
c) Intent: A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such error.
d) Jurisdiction: An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.
e) Advisory opinions of Commission: No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
1692l, Administrative enforcement
a) Federal Trade Commission: Compliance with this subchapter shall be enforced by the Commission, except to the extent that enforcement of the requirements imposed under this subchapter is specifically committed to another agency under subsection (b) of this section. For the purpose of the exercise by the Commission under the Federal Trade Commission Act, a violation of this subchapter shall be deemed an unfair or deceptive act or practice in violation of that Act. All of the functions and powers of the Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with this subchapter, irrespective of whether that person is engaged in commerce or meets any other judicial tests in the Federal Trade Commission Act, including the power to enforce the provisions of this subchapter in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.
b) Applicable provisions of law: Compliance with any requirements imposed under this subchapter shall be enforced under:
1) section 8 of the Federal Deposit Insurance Act, in the case of:
(A) national banks, by the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national banks), by the Federal Reserve Board; and
(C) banks the deposits or accounts of which are insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), by the Board of Directors of the Federal Deposit Insurance Corporation;
2) section 8 of the Federal Deposit Insurance Act [12 USC 1818], by the Director of the Office of Thrift Supervision, in the case of a savings association the deposits of which are insured by the Federal Deposit Insurance Corporation;
3) the Federal Credit Union Ace, by the Administrator of the National Credit Union Administration with respect to any Federal credit union.
4) subtitle IV of Title 49, by the Interstate Commerce Commission with respect to any common carrier subject to such subtitle;
5) the Federal Aviation Act of 1958, by the Secretary of Transportation with respect to any air carrier or any foreign air carrier subject to that act; and
6) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that act), by the Secretary of Agriculture with respect to any activities subject to that act.
c) Agency Powers: For the purpose of the exercise by any agency referred to in subsection (b) of this section of its powers under any Act referred to in that subsection, a violation of any requirement imposed under this subchapter shall be deemed to be a violation of that Act. In addition to its powers under any provision of law specifically referred to in subsection (b) of this section, each of the agencies referred to in that section may exercise, for the purpose of enforcing compliance with any requirement imposed under this subchapter any other authority conferred on it by law, except as provided in subsection (d) of this section.
d) Rules and regulations: Neither the Commission nor any other agency referred to in subsection (b) of this section may promulgate trade regulation rules or other regulations with respect to the collection of debts by debt collectors as defined in this subchapter.
1692m. Report to Congress by the Commission
a) Not later than one year after the effective date of this subchapter and at one-year intervals thereafter, the Commission shall make reports to the Congress concerning the administration of its functions under this subchapter, including such recommendations as the Commission deems necessary or appropriate. In addition, each report of the Commission shall include its assessment of the extent to which compliance with this subchapter is being achieved and a summary of the enforcement actions taken by the Commission under section 1692l of this title.
b) In the exercise of its functions under this subchapter, the Commission may obtain upon request the views of any other Federal agency which exercises enforcement functions under section 1692l of this title.
1692n Relation to State laws
This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter.
1692o Exemption for State regulation
The commission shall by regulation exempt from the requirements of this subchapter any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this subchapter, and that there is adequate provision for enforcement.