Debt Collection and the FDCPA
The Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.A. § 1692 et seq, is a federal law that governs the process of debt collection. It was created in part to minimize harassment towards debtors. More specifically, the FDCPA was enacted in order to reign in what Congress perceived as a widespread use of false, unfair, abusive, and misleading debt collection practices. The FDCPA does not typically apply to original creditors. An original creditor is the person or business to whom the debt is originally owed. Rather, the Act is aimed at regulating third party debt collection agencies, who may or may not be attorneys and thus are not always trained in the law. In Pennsylvania, the state legislature has incorporated much of the language of the FDCPA into the Fair Credit Extension Uniformity Act (FCEUA), 73 P.S. § 2270.01 et seq.
The important difference between the FDCPA and the FCEUA is that the FCEUA regulates original creditors as well as debt collectors.
The prohibited actions for creditors are substantially the same requirements that the FDCPA places on third party debt collectors. However, the FCEUA does not provide the same leverage as the FDCPA, because the money damages are limited and discretionary. It is important to note that, certain commercial debts are not covered by the FDCPA. The broad definition of “debt" under the Act includes the limitation that it must have been incurred for “personal, family, or household purposes." Section 1692a(4).
The Federal Trade Commission has published text of the FDCPA online at http://www.ftc.gov/os/statutes/fdcpa/fdcpact.shtm.
Basically, the FDCPA places limitations on communications from the debt collector to the consumer and third parties, including:
- Debt collectors may not misrepresent the validity or amount of a debt.
- They may not threaten to use a legal process or remedy which is unavailable to them, or that they have no intention of using.
- They may not harass a consumer with excessive phone calls or letters.
- There are various limitations on communications with a consumer’s employer.
- They may not use any false, deceptive or misleading tactics in an effort to get the consumer to pay. What does the debt collector/creditor need to know? The FDCPA in some regards is common sense. It sets parameters as to what methods debt collectors can and cannot use. If a debtor believes that they are being harassed, it is important to understand the FDCPA to stop it. It is also important to know the statute of limitations and to document any evidence of improper debt collection techniques. Creditors need to ethically pursue all collection activities and are prohibited from calling debtors at certain hours and/or talking to employers or family/friends of the debtor.
What does the everyday consumer/debtor need to know? The statute of limitations under the FDCPA is one year. The FDCPA is a strict liability statute, which means that a consumer only needs to prove a mere technical violation of the law. Section 1692k sets forth the amount of damages for violation of the Act. The consumer may collect any actual damages sustained as a result of a violation. Actual damages are out of pocket losses. However, the consumer does not have to prove an actual loss. The court has the discretion to award additional damages up to $1,000.00 as punishment to the debt collector. Most importantly, “in the case of any successful action to enforce the foregoing liability" the court shall award “the costs of the action, together with a reasonable attorney's fee as determined by the court." If the consumer can prove even one technical violation of the FDCPA, the debt collector must pay the plaintiff’s attorney fees. This provision places considerable leverage in the hands of the consumer, because often the debt collection companies will have insurance and insurance companies understand that if they lose, they will be paying both side's attorneys. Hence, there can be significant pressure on insurance companies to settle these cases.
- The mandatory payment of attorney fees does not apply to claims against original creditors under the FCEUA. In that circumstance the court may award attorney fees, but there is no guarantee.
- If you have questions about a possible violation of the FDCPA, or have been sued under the FDCPA concerning debt collection techniques, we offer free consultations at 412.802.6666.
- Flaherty Fardo is an experienced Pittsburgh law firm handling debt collection throughout Pennsylvania. This article was contributed to by Joshua Ward.