What is the Fair Debt Collection Practices Act (FDCPA)?
How the FDCPA Affects Your Business
The Fair Debt Collection Practices Act (FDCPA) protects consumers from harassment and privacy violations by bill collectors. It was enacted in 1966 and was amended by the Financial Services Regulatory Relief Act of 2006.
Two Reasons You Need to Know About the FDCPA
The FDCPA affects third parties, like bill collectors, who collect on behalf of business clients. It doesn't affect your business directly, even if you are trying to collect on a bill owed to you by a customer.
But there are two reasons you (as a business owner) need to know about this law.
1. The FDCPA doesn't directly affect your relationship with your customers. If one of your customers owes you money and you call that customer to collect what's owed, the FDCPA doesn't protect the customer. But, it's a good idea to follow the restrictions of this consumer protection act when you do contact customers who owe you money.
2. If you are hiring a debt collection service, you could be sued if the collectors use unlawful tactics to collect money from your customers. Check the references of collection agencies you use and make sure they don't use any of these illegal practices.
What Are Bill Collectors Required to Do?
Every time a collections agency or other bill collector contacts a customer in relation to a debt owed to you, you must identify yourself and your company and state that the purpose of the contact is to collect on a debt owed you.
If the debtor notifies you that he or she has an attorney, you must only contact the attorney, not the debtor directly.
What Are Bill Collectors Not Allowed to Do?
- Contacting someone else to talk about a debt (you can contact someone to locate the debtor). So you cannot contact the debtor's mother or employer to ask them to help you collect. This prohibition does not apply to co-signers; since they have signed on the debt, they may be contacted.
- If you contact someone else about a debt to locate a debtor, you cannot contact that person again.
- You cannot communicate with a debtor at "inconvenient" times or places, such as phoning during the middle of the night or at the debtor's workplace
- You cannot contact 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.
- You cannot engage in "harassing, oppressive, or abusive" contact, or threaten violence.
- You cannot use profane language when attempting to collect on a debt.
- You cannot falsely represent yourself or represent yourself as someone else, including an attorney or a government agency, in order to collect on the debt.
- You cannot call the debtor on the phone too often or after regular waking hours (like 2 a.m.)
Can a Debtor Sue Me?
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. Not only does the lawsuit stop the debt collection process, but then you are forced to defend yourself against a suit, tying up more money and time.
How Can I Protect Myself and My Company From Debtor Lawsuits?
- First, read as much as you can about the FDCPA and talk to your attorney about its provisions, before you start collecting on debts.
- Second, avoid any appearance or perception of harassment or privacy invasion, in every contact with those who owe you money.
Disclaimer: This article is a brief overview of the provisions of the FDCPA. The law is complex, and there may be specific sections that are applicable to your business. Please consult with your attorney before attempting to contact customers for collection purposes.
For more information, read this Fair Debt Collection Practices Act text (in PDF format).