Quick Overview of the FDCPA

[David A. Szwak]

http://www.bankersonline.com/lending/fdcpa_ref.html

Fair Debt Collection Practices Act
- A Quick Reference Guide
by Mary Beth Guard, Editor, BankersOnline.com

It would be great if every loan you made was paid in full, as agreed. Unfortunately, that's not reality. No matter how carefully you scrutinize an application at the outset, there will still be instances when the borrower defaults. For that reason, every loan officer should have at least some familiarity with the federal Fair Debt Collection Practices Act and should understand when and how it might affect the collection process. Here is our quick reference guide:

The Fair Debt Collections Practices Act ("FDCPA") applies only to debt collectors. That term is defined in the FDCPA to include any person who 1) uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or 2) who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. It includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. In most instances, therefore, a financial institution will not be considered a debt collector, because it will be collecting its own debts in its own name.
The only kind of debt which is covered by the FDCPA is debt incurred by a consumer primarily for personal, family or household purposes.

A financial institution is not a debt collector when it collects its own debts in its own name or when it collects debts that were not in default when obtained. If the institution purchases debts that were in default and it collects those debts, it may be deemed a debt collector.

A financial institution will not be considered a debt collector if it collects debts regularly for other institutions that it is related to through common ownership or control.

Among the most common violations of the FDCPA are:
The use of postcards to send debt collection messages;

Contacting the consumer on the job when you know the employer forbids such contact;

Calling the consumer after the cut-off hour;

Using vile or profane language;

Contacting the consumer after you know he is represented by an attorney;

Contacting the consumer after you know he has sent written notice that he wants you to stop the communication;

Disclosing too much information to third parties you contact trying to find the debtor.


The FDCPA generally limits:
Who you can contact about a consumer's debt;

What you can say when you make the contact;

How you can make the contact;

Times you can make the contact;

When you are required to cease contact.


The practices which a debt collector is prohibited from engaging in include harassment, oppression, and abuse of the debtor or any person.

A debt collector is also prohibited from making false or misleading representations.

The bottom line is that there are very specific requirements and prohibitions contained in this important federal law and there are harsh consequences for failure to observe them. You should take steps to ensure that any third-party with whom you contract to collect debts on behalf of your institution is well-versed in the FDCPA's provisions and will stringently abide by those provisions.