The Fair Debt Collection Practice Act (FDCPA) prohibits debt collectors from engaging in unfair, deceptive, or abusive practices when attempting to collect a debt. It is enforced by the Federal Trade Commission (FTC). It does not protect businesses, it protects individuals.
According to the FDCPA, debt collectors cannot:
- Contact an individual at any inconvenient time or place, including early in the morning or late at night;
- Contact an individual at work unless they have been given permission to do so;
- Use violence or threats;
- Publish the names of individuals who owe money;
- Repeatedly call, harass or annoy the individual;
- Use profane language;
- Refuse to identify themselves;
- Pretend to be a government official or a lawyer;
- Arrest the individual;
- Participate in unfair practices; or
- Reveal confidential information about debtors to third parties.
Pursuant to the FDCPA, debt collectors are also prohibited from using deceptive practices, which may include:
- Misrepresenting themselves as an attorney, when, in fact, they are not;
- Threatening arrest an individual; or
- Misleading an individual about the amount of money they owe.
What is the Difference Between a Debt Collector and a Telemarketing Scam?
There are notable differences between a debt collector and a telemarketing scam. In many cases, a telemarketing scam begins with a robotic call, but some may be calls from a live individual. The scammers will refuse to tell the individual:
- About the debt they have;
- How much debt they owe;
- What the debt is related to; or
- Who is responsible for the debt.
If the caller is unable or unwilling to give any information regarding why the debt is owed, they are not a debt collector. If an individual receives one of these calls, they should make sure to document the name of the individual or the company that is calling, especially if they are not sure whether it is a debt collector or a scammer.
What are Legal Debt Collection Limits?
Debt can be extremely stressful, especially for individuals who are on a strict budget. Sometimes, repayment may feel impossible. Fortunately, the Consumer Credit Protection Act limits the amounts and property a debt collector is permitted to seize. Each state also has laws regarding debt collection.
Some exemptions from debt collectors under many debtor protection laws include:
- Wages;
- Necessities;
- Vehicles; or
- Harassment.
Generally, a creditor cannot seize more than a certain percentage of a debtor’s wages. The maximum amount a creditor can seize is 25% of a debtor’s disposable income under federal law and in most states. There are more exemptions to wage garnishment that will be discussed below.
In addition, creditors are not permitted to seize a debtor’s food, clothing, or other necessities. This may include electronics such as computers and televisions.
Creditors are generally note permitted to seize or sell a debtor’s automobile. If a debt collector is permitted to seize a vehicle, it may be protected from sale if the value is less than a certain amount, usually $2,000. A vehicle is typically always protected from seizure if it is used in the debtor’s business as a tool in their trade.
A debtor is legally protected from harassment or public embarrassment. A creditor cannot discuss the debtor with others, except a credit reporting agency or an official directly involved in the collection efforts. If a debt collector violates unfair collection practices laws or harasses a debtor, they may be subject to fines or a lawsuit from the debtor.
What are the Limits on Seizing a Debtor’s Wages?
As noted above, federal and state protection laws are in place that prevent the seizure of too large a percentage of a debtor’s wages. Many of these laws are specific to the debtor’s state of residence.
In general, if a debtor’s income is very low, they are exempt for income seizure. A debtor must be left with 30 times the federal minimum wage of their income. Minimum wage is currently $7.25, leaving a worker with a weekly wage of $217.50. 25% of the remaining income above this minimum wage may be seized. This may differ if the state minimum wage differs, such as minimum wages in the following states:
- California – $8.00;
- Florida – $7.03;
- Illinois – $8.25; and
- New York – $8.00.
If more than one party is seizing a debtor’s income, a debt collector may only seize wages if the other party is taking less than 25% of the debtor’s disposable income. If a debtor needs the income for basic support, they may be able to object to having a collector seize any funds from their paycheck.
It is not possible for a debt collector to seize funds from Social Security benefits or a pension. If an individual has a judgment against them for child or spousal support, the debt collector may be able to seize funds from sources including:
- Unemployment insurance;
- Worker’s compensation awards;
- Relocations benefits; or
- Disability or health insurance benefits.
What Happens if a Debtor Declares Bankruptcy?
If a debtor declares bankruptcy under Chapter 7 of the Federal Bankruptcy Act, a creditor’s right to collect on a court judgment is usually terminated. An exception to this may be if the creditor obtained the judgment because their property was injured by the debtor’s malicious behavior. A creditor of this type may be required to intervene in the bankruptcy proceeding.
What is the Fair Credit Reporting Act?
The Fair Credit Reporting Act (FCRA) is a federal debt collection law that protects an individual’s credit information that is shared with third parties. It provides guidelines on how debt collections must be reported to credit bureaus.
The FCRA provides individuals with important rights, including:
- Their right to see their own credit report;
- Their right to know when and by whom their credit report has been accessed;
- Their right to dispute inaccurate information on their report; and
- Their right to know when a credit report has been used negatively against them.
The three main nationally recognized credit bureaus are:
- Equifax;
- Experian; and
- TransUnion.
In accordance with the FCRA, credit bureaus are required comply with certain tasks, including:
- Providing an individual with a copy of their credit report upon request;
- Investigating information that an individual disputes on their report;
- Limiting access to an individual’s file; and
- Allowing an individual to opt-out of any prescreened credit offers.
What are the Penalties for Violating the FCRA?
Yes, there are penalties for violating the FCRA. If a credit report is required for a reason other than a legitimate business purpose or without an individual’s permission, the requesting party may be in violation of the FCRA. The FCRA allows an individual to sue for damages for willful or negligent disclosure of their credit information. The individual may be able to sue for:
- Actual damages in an amount up to $1,000;
- Reasonable costs or attorney’s fees; or
- Punitive damages, if so permitted by the court.
Should I Seek Help for an Attorney Regarding my Debt Collection?
Yes, it is extremely important to seek the assistance of a collection attorney with any debt collection issues, whether you are collecting a debt or a debt is being collected from you. There are specific laws and requirements that must be followed for debt collecting and an attorney will be able to advise you on how to stay within those laws while collecting a debt.
If a debt collector is attempting to collect a debt from you, an attorney can advise you of your rights. Ignoring debt collection issues will only exacerbate the problem. An attorney can advise you of your rights as a debtor as well as what income or property may be collected from you. An attorney can also represent you during any court proceedings, if necessary.
