The federal Fair Debt Collection Practices Act (FDCPA) provides many protections for consumers against harassment and other oppressive actions on the part of debt collectors. Many states also have state laws that provide some additional protections.
The FDCPA mostly covers debt collectors and not other creditors. A debt collector is a person or company that buys debt from primary creditors, usually at a discount, and then tries to collect the debts from the borrowers. So-called first-party collectors are the original creditors who may seek repayment of debts that a consumer owes directly to them, e.g., banks and credit card issuers.
So, for example, if a person with a credit card fails to make the minimum payment on their credit card balance for one or two billing cycles, an employee of the card issuer’s collection department would probably contact the cardholder to ask for payment.
But if a debt goes unpaid for several months, the original creditor often sells the debt to an outside company, a debt collector. The federal FDCPA generally applies only to these third-party collectors. If a person believes that a debt collector is violating the federal FDCPA, they may file a complaint against the debt collector with the Federal Trade Commission (FTC).
Among the practices by debt collectors that are prohibited by federal law are the following:
- Calling a debtor at work if the debtor asks them not to do so;
- Talking to anyone other than a debtor and the debtor’s attorney unless they have the permission of a court.
- Generally, a debt collector must communicate exclusively with a person’s attorney if they have an attorney;
- Using obscene language, threatening violence, or repeatedly calling someone for no reason.
Under the federal FDCPA, if a debtor asks a debt collector in writing to stop contacting them, the debt collector can only respond to say there will be no more contact or that it is taking legal action against the debtor.
If a person believes that a debt collector is violating the federal FDCPA, they may file a complaint against the debt collector with the Federal Trade Commission (FTC).
What Are State Laws on Debt Collection Practices?
More than half of the states in the U.S. have laws that provide more protection to consumers from debt collectors by regulating their practices more strictly than federal law does.
For example, New York recently enacted the Consumer Credit Fairness Act (CCFA). This act offers some stronger consumer protections than those offered by federal law. One significant provision of New York’s CCFA reduces the statute of limitations for collecting a debt from six to three years.
This means that a creditor must take legal action to collect a debt within 3 years of default or lose its right to legal collection measures. The law further prevents the statute of limitations from starting to run again if the debtor makes a payment or otherwise acknowledges the debt.
New York’s CCFA also has requirements regarding notification for creditors and debt collectors who sue debtors. Lastly, the law provides that debt collectors must be able to prove they own a debt when they sue to collect on it. This addresses that debt collectors are often not the original entity from which the debtor obtained credit but have purchased the debt by paying off the debt. Under New York law, a debt collector must be able to prove their purchase of a legitimate debt.
The Texas Debt Collection Act adds to protections for debtors in Texas. This law prohibits debt collectors from doing the following:
- Threatening a debtor with violence or other criminal conduct;
- Using obscene language in communications with debtors:
- Falsely claiming that a consumer has committed fraud or other crimes;
- Threatening to arrest a debtor or to take their property without following the necessary legal procedures;
- Harassing debtors by calling them on the telephone anonymously or calling repeatedly or continuously;
- Calling a debtor collect and not disclosing their true identity before the charges are accepted.
Texas offers some protections for a person’s assets. If a person declares their residence a homestead, it cannot be taken to pay any debt other than debts taken for the purchase of the home, i.e., a mortgage in default, for home improvement, a home equity loan, or to pay certain taxes.
In Texas, a person’s wages are protected from garnishment except to pay debts related to court-ordered child support, unpaid taxes owed, and student loans that a person has not paid. Debt collectors cannot garnish wages to collect money to pay a consumer debt, e.g., credit card debt or car loans. Texas consumers are encouraged to file a complaint about illegal activity by debt collectors with the Texas Attorney General.
Maryland law protects consumers from abuse and deception by debt collectors. Maryland law is similar to the federal FDCPA but offers additional protection to consumers. One important difference is that Maryland law applies to primary creditors as well as debt collectors.
Maryland law also requires that collection agencies be licensed, and a state board regulates them.
The Maryland Fair Debt Collection Practices Act (MFDCPA) applies to any person or organization that collects debts. It defines a collector as a person who collects a debt that results from a consumer transaction. So, while the FDCPA applies to people in the debt collection business, Maryland law applies to all kinds of businesses and entities that engage in debt collection.
So, any person or business seeking payment from a debtor must comply with the MFDCPA. The Maryland law applies to most consumer debts, e.g., credit card debt, car loans, consumer leases, and mortgages.
What Kind of Protections Do State Laws Supply?
As noted above, the kind of protections offered by state laws varies greatly and depends entirely on the state where a person lives. Another example is the California Fair Debt Collection Act, which adds some protections not available in the federal FDCPA. For one thing, as noted, while federal law applies only to the collection practices of debt collectors, the California version applies to others engaged in collecting money owed to a creditor.
California protects consumers in their employment. They do this by prohibiting a creditor or collection agency from contacting a person’s employer about their financial situation. The situations in which a creditor or collection agency can contact a debtor’s employer are limited to the following.
- To ensure that a person is still working where they have claimed to be working;
- To arrange the garnishment of a debtor’s wages as authorized by a court garnishment order;
- If the debt involves a medical bill, the creditor may contact a person’s employer to learn about the health insurance plan provided to employees.
As Maryland does, other states also require that debt collectors be licensed by the state, as well as bonded. A few states, including California, have requirements that a debt collection agency collector must meet to obtain a license from the state.
Do I Need the Help of a Lawyer with My Debt Collection Issue?
If you are being harassed by a creditor or collection agency, you want to consult a debt collection practices lawyer. Your lawyer can tell you whether the collector is violating the law and, if so, what you can do about it.
If your debts have become unmanageable, you may also want to consult a debt attorney with experience dealing with consumer credit issues. A bankruptcy attorney can explain how filing for bankruptcy might help you. For one thing, filing for bankruptcy stops the debt collection efforts of all of your creditors. It offers an opportunity to work out your debt situation and possibly put an end to some of the debts.
