What Are Fair Debt Collection Practices?

The FDCPA Explained

Woman looking stressed reading bills

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Fair debt collection practices are set forth in regulations that protect consumers from privacy violations and harassment by bill collectors.

Learn what the Consumer Financial Protection Bureau says about the right and wrong ways to collect a debt.

What Are Fair Debt Collection Practices?

The Fair Debt Collection Practices Act (FDCPA) sets forth what's allowed when it comes to debt collection. The law was enacted in 1977 and amended by the Financial Services Regulatory Relief Act of 2006. A new revision was released in October 2020 by the Consumer Financial Protection Bureau (CFPB) and is scheduled to take effect in December 2020. It adds social media and texting as permissible forms of contact. 

How Fair Debt Collection Practices Work

Fair debt collection practices laid out by FDCPA affect third parties such as bill collectors—who collect on behalf of business clients. Still, it is important as a business owner to know about the law.

If one of your customers owes you money and you contact that customer to collect what's owed, the FDCPA doesn't protect the customer.

It's a good idea to follow the restrictions of this consumer protection act when you do contact customers who owe you money. If you hire a debt collection service, you could be sued if the collectors use unlawful tactics to collect money from your customers. Check the references of any collection agencies you use and make sure they don't use any of these illegal practices. 

Every time a collections agency or other bill collector contacts a customer in relation to a debt owed to you, they must identify themselves and their company, and state that the purpose of the contact is to collect on a debt owed you.

If the debtor notifies you that they have an attorney, you must only contact the attorney, not the debtor directly.

How the Fair Debt Collection Practices Act (FDCPA) Works

The "mini Miranda" disclosing that anything said on the call can be used to collect a debt is important to deliver at the beginning of a call. The FDCPA prohibits debt collectors from:

  • Contacting someone else to talk about a debt (you can contact someone to locate the debtor). You cannot contact the debtor's mother or employer to ask them to help you collect. This prohibition does not apply to co-signers who guarantee a loan. Since they have signed on the debt, they may be contacted.
  • Making a second contact with someone else about a debt in an attempt to locate the debtor.
  • Communicating with a debtor at "inconvenient" times or places, such as phoning during the middle of the night or at the debtor's workplace.
  • Contacting a debtor if you have received a "cease and desist" request, a notice that you must only communicate through the debtor's attorney, or a notice that the debtor refuses to pay the debt.
  • Engaging in "harassing, oppressive, or abusive" contact, or threatening violence.
  • Using profane language when attempting to collect on a debt.
  • Falsely representing yourself or representing yourself as someone else, including an attorney or a government agency, in order to collect on the debt.
  • Calling the debtor on the phone too often or after regular waking hours (i.e., 2 a.m.)

Debtors can and do initiate lawsuits against debt collectors who they perceive are engaging in harassment or other illegal tactics to collect on a debt.

The fact that your business is not strictly included in this law doesn't mean you are exempt from a lawsuit. A lawsuit stops the debt collection process and can force you to defend yourself against a suit, tying up more money and time.

Read as much as you can about the FDCPA and talk to your attorney about its provisions, before you start collecting on debts. Avoid any appearance or perception of harassment or invasion of privacy, in every contact with those who owe you money.

While the new 2020 provisions allow collectors to use social media, if the debtor asks you to stop, you must. All social media contact must remain private. No public posts can be made on a Facebook page or to a Twitter account.

Key Takeaways

  • Fair debt collection practices are contained in the Fair Debt Collection Practices Act (FDCPA).
  • New revisions to the act add social media and texting as ways you can contact a debtor.
  • The law officially applies to debt collectors—not business owners—but it is wise to follow the rules anyway.
  • Debtors have the right to sue if a debt collector fails to adhere to the law.