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Understanding Fair Debt Collection Practices Act

There was an act that was added in 1978 to eradicate and eliminate abusive practices in the collection of consumer debts. This U.S. statute is set up under the title VIII of the Consumer Credit Protection Act and is known as The Fair Debt Collection Practices Act. It provides the consumer with a ground for disputing and obtaining validation of debt information in order to ensure the information’s accuracy. The act promotes fair debt collection, and creates deadlines under which debt collectors may conduct business. By prescribing penalties and remedies for violations of the act, the FDCPA defines rights of consumers involved with debt collectors. Sometimes the act is also used with the fair reporting act.

The Fair Debt Collection Practices Act requires debt collectors to do things such as identify themselves, give the name and address of the original creditor, notify the consumer of their right to dispute the debt, provide verification of the debt and file a lawsuit in a proper venue. In order to avoid the collectors, consumers have the options of simply not picking up the phone, screening their calls using caller ID or having calls blocked when the debt collector calls if their phone has the necessary feature.

The FDCPA’s definition of a debt collector is “any person who uses any instrumentality of interstate commerce or the mails in any business the principal 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”. The FDCPA generally applies only to third party debt collectors. This act doesn’t apply to an “original creditor”, but in some states (like California) they have similar consumer protection laws that mirror the FDCPA and regulate original creditors. The definitions of a debt collector and a collector of debt have changed over time, and some federal courts have ruled that under the FDCPA a collector of debt is not a “creditor” but rather a “debt collector” where the collector of debt buys defaulted debt from an original creditor for the purpose of debt collection. The act’s definitions for “debt” and “consumers” specifically restrict the coverage of the act to personal, family or household transactions.

Conduct Prohibited by the Act

When attempting to collect debts, the FDCPA prohibits the following acts as they are “abusive and deceptive”:

  • Contacting consumers by telephone outside the hours of 8:00am and 9:00pm
  • Failing to cease communication upon request
  • Causing a telephone to ring or engaging any person in telephone conversation repeated or continuously
  • Using abusive or profane language
  • Misrepresenting the debt or using deception to collect debt
  • Making contact by embarrassing media
  • Reporting false information on a consumer’s credit report
  • Communication with consumers at their place of employment
  • Contacting consumer known to be represented by an attorney
  • Seeking unjustified amounts
  • Threatening arrest or legal action

Conduct That Is Required by the FDCPA

Debt collectors are required by the Fair Debt Consumers Protection Act to do the following:

  • Identify themselves and notify the consumer in all communication that the communication is from a debt collector
  • Notify the consumer in the initial communication that any information obtained will be used to effect collection of the debt
  • Provide the name and address of the original creditor
  • Provide verification of the debt
  • If a debt collector chooses to file a lawsuit it is only allowed where the consumer lives/signed the contract (proper venue)
  • Notify the consumer of their right to dispute the debt with the debt collector

Why Debt Collectors are Able to Garnish Consumers’ Wages

When a consumer fails to pay a debt, the debt collector or creditor can generally sue them to collect. If the creditor were to win, (which they probably won’t since the consumer is going to get all the help he needs right here) the court will enter a judgment against them. The judgment will state the amount of money owed, and it allows the creditor or collector to get a garnishment order against the consumer, which directs a third party, like the consumer’s bank, to turn over funds from the account to pay the debt. When a consumer’s employer withholds part of their compensation to pay debts, that is called wage garnishment. Wages can usually be garnished only as a result of a court order, so it is important that consumers do not ignore a lawsuit summons, because if they do, they automatically lose the opportunity to fight a wage garnishment.

Federal Benefits Exempt from Garnishment

Federal benefits may be garnished under certain circumstances such as alimony, child support, student loans or to pay delinquent taxes. The following federal benefits are exempt from garnishment:

  • Veterans Benefits
  • Social Security Benefits
  • Supplement Security Income Benefits
  • Military Annuities and Survivors’ Benefits
  • Civil Service and Federal Retirement and Disability Benefits
  • Service Members’ Pay
  • Student Assistance
  • Merchant Seamen Wages
  • Foreign Service Retirement and Disability Benefits
  • Railroad Retirement Benefits
  • Longshoremen’s and Harbor Workers’ Death and Disability Benefits
  • Federal Emergency Management Agency Federal Disaster Assistance
  • Compensation for injury, death, or detention of Employee of U.S. Contractors Outside the U.S.

Reporting a Debt Collector for an Alleged Violation

Should a debt collector abuse a consumer’s rights or engage in prohibited conduct, the consumer can report them. Any problems with the debt collector can be reported to one’s state Attorney General’s office and the Federal Trade Commission. The FTC produces an annual report to Congress of its findings with respect to its FDCPA enforcement activities. Consumer complaints are detailed in the report about alleged debt collector violations of the FDCPA. Four years ago the report indicated that the FTV received almost 79,000 consumer complaints about third party debt collectors. There are a number of states that have their own debt collection laws different from that of the federal Fair Debt Collection Practices Act so the Attorney General’s office can help determine the consumer’s rights under the state’s law.

Additional Reading

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