Collection agencies are required to follow certain federal and state laws when contacting an individual regarding debt collection. These laws are designed to protect debtors from the potential harassment by Collection Agencies. Not following these laws can result in fine, lawsuits and other legal implications. Good training given to debt collectors can save thousands of dollars in fines later. Most common federal laws that collection agencies need to follow are FDCPA, TCPA, HIPAA and FCRA.
We have tried to keep this information short and fairly accurate, but as you can imagine there are extensive details behind these laws. We recommend you to use this article only for your basic understanding, and visit the relevant government websites or an expert lawyer for the most up to date information and all those extensive details.
FDCPA (The Fair Debt Collection Practices Act)
A federal law that provides limitations on what debt collectors can say or do when collecting certain types of consumer debt (B2C collections). The FDCPA prohibits debt collection agencies from using abusive, unfair or deceptive practices to collect debts from a debtor. The FDCPA does not cover business debts.
If a consumer sends a written dispute or request for verification within 30 days of receiving the notice, then the debt collector must either mail the consumer the requested verification information or cease collection efforts altogether.
A debt collector cannot:
- Continue to call a debtor after they notify them to stop contacting them. But this does not prevent the debt collector from pursuing other legal ways to collect money including a lawsuit or reporting negative information to a credit reporting company.
- If a debtor has requested a collection agency to validate the debt, yet they are being contacted or being pushed hard for debt collection during the validation period.
- Calling a debtor before 8:00 A.M and after 9:00 P.M. local time.
- Employing foul language or blackmailing.
- Threatening to arrest, file police complaint, informing the employer and threatening of other legal actions.
- Using false credit report information.
- Contacting a debtor at work ( despite that the debt collector knows that a debtor is not allowed to receive such communications at work).
- Ring or engaging any person in telephone conversation repeatedly or continuously.
- Call the debtor’s friends or coworkers regarding the debt or discuss anything related to the debt with them.
- Attempts to intimidate the debtor.
- Threaten with negative credit reporting.
- Make automated robocalls in an attempt to collect.
- Seek unjustified amount.
- Use obscene or profane language, racial slurs or insulting remarks.
- Representing that the consumer has committed a crime or disgraceful conduct.
- Not disclosing that he is a debt collector only or falsely representing some other entity (ex: IRS, FBI, Police, etc.) to pressurize the debtor to pay.
- Fair Debt Collection Practices for Servicemembers Act (H.R. 5003) protects defense service members more than civilians.
If a debt collector knows that an attorney is representing a debtor about the debt, the debt collector generally must directly contact the attorney instead.
A debt collector cannot sue a debtor after statute of limitations has expired. These are usually between three and six years.
FCRA: (Fair Credit Reporting Act)
This law covers how debt collection is reported in credit reports. A collection agency will typically require a creditor to provide “SSN” and/or “Date of Birth” of the debtor.
This legislation was enacted to promote the accuracy, fairness and privacy of consumer information reported to the consumer reporting agencies. It protects consumers from the willful and/or negligent inclusion of inaccurate information in their credit history reports.
Three major credit bureaus are Experian, Equifax and Transunion. These is a 180-day waiting period before unpaid medical debts can show up on people’s credit reports.
TCPA: (Telephone Consumer Protection Act)
This is a federal law designed to safeguard consumer privacy. It restricts telemarketing communications via voice calls, SMS and fax. It also applies to debt collections, meaning they cannot call debtor’s cell with an auto-dialer, unless they have the debtor’s permission to call his mobile phone.
Even if a debt collector calls on a debtors cell phone, they have the right to tell the caller not to contact them. It is recommended to this in writing with a letter sent by certified mail. Calls to cellphones using a robocalls or pre-recorded voice without consent are also illegal.
The TCPA prohibits any telephone solicitation before 8 a.m. and after 9 p.m. local time. Penalty can be between $500 to $1,500 per call or text. There are also laws around DNC (do-not-call) list that a debt collector must follow.
HIPAA: (Health Insurance Portability and Accountability Act)
This legislation that provides data privacy and security provisions for safeguarding medical information including medical condition of a patient. HIPPA laws do not protect a patient from his billing information being shared with a debt Collection Agency, since that forms the basis of debt recovery and verification of debt.
Exact nature of services received are private and full medical records cannot be submitted to a collection agency. Debtors who discover that the collector knows too much details of diagnosis and treatment, may file a complaint with hhs.gov on the context that their privacy has been violated. This must be filed within 180 days of the violation. Office for Civil Rights (OCR) may ask the debt collector to take a corrective action or impose civil money penalties.
Special State Rules:
Many states have also enacted laws to provide protection for consumers who are dealing with debt collectors, sometimes it includes original creditors too.
California Fair Debt Collection Laws
Rosenthal Fair Debt Collection Practices Act, is California’s version of the Fair Debt Collection Practices Act (FDCPA). Rosenthal act provides consumers protection from first party creditors as well.
Florida and Colorado Fair Debt Collection Laws
It prohibits both debt collectors and creditors from using deceptive and abusive tactics in collecting debts.
Georgia Fair Debt Collection Laws
The Georgia Industrial Loan Act applies to consumer loans less than $3,000 with a loan length less than 36 months and 15 days.
Illinois Collection Agency Act
The Illinois collection agency act (ICAA) requires that all debt collectors must have a license before being operational.
New York City:
Debt collectors must be licensed as debt collectors by the NYC Department of Consumer Affairs and cannot call the debtor more than twice a week about a debt.
Not all states and cities specific debt collection laws have been covered here.
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