Fair Debt Collection Practices Act (FDCPA) Violations & Penalties - Federal Lawyer
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Fair Debt Collection Practices Act (FDCPA) Violations & Penalties

Fair Debt Collection Practices Act

The federal Fair Debt Collection Practices Act (FDCPA) limits the means that companies, financial institutions, and other organizations can use to collect monies they are owed. Violations of the FDCPA can expose organizations to both civil litigation and administrative enforcement action, so a careful and committed approach to compliance is essential. By prioritizing FDCPA compliance, not only can organizations avoid inadvertent violations of the law, but they can also put themselves in a strong position to defend against allegations of violating the law and performing unfair debt collection practices if necessary.

So, what does the FDCPA prohibit (and what means of debt collection does it allow)? Just as important, what are the potential consequences of noncompliance? Here’s what business owners, executives, in-house counsel, and other organizational leaders need to know:

The Fair Debt Collection Practices Act (FDCPA): An Overview

Congress enacted the Fair Debt Collection Practices Act in 1977 as a direct response to concerns about abusive consumer debt collection practices. The FDCPA supplements the Consumer Credit Protection Act (CCPA) and Fair Credit Reporting Act (FCRA), both of which also establish important federal compliance obligations for businesses and other organizations that collect debts from consumers.

The Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC), and U.S. Department of Justice (DOJ) share responsibility for enforcing the FDCPA. As we discuss in greater detail below, while the FDCPA gives consumers a private right of action to hold covered creditors responsible for violations, violations of the statute can lead to federal enforcement action as well.

A key aspect of the FDCPA is that its scope is limited to collection efforts related to debts incurred in the consumer context. As the CFPB explains:

“The FDCPA prohibits debt collection companies from using abusive, unfair, or deceptive practices to collect debts from [consumers]. . . . [It] covers the collection of debts that are primarily for personal, family, or household purposes . . . [but] doesn’t cover business debts, and it also doesn’t generally cover collection by the original creditor or business [a consumer] owed money to.”

This last point is important to clarify. While the FDCPA restricts the actions of debt collection agencies and other organizations that assist with debt collection or assume outstanding creditor claims, it generally doesn’t apply to organizations that extend credit in the first place. But, there are exceptions; and, even if an organization isn’t covered under the FDCPA, it may still need to comply with the CCPA, FCRA, and various other federal laws and regulations.

Common Violations of the FDCPA

Violations of the Fair Debt Collection Practices Act can take several different forms. Under the FDCPA, debt collection agencies, third party debt collectors, debt buyers, law firms, and other organizations are subject to both affirmative obligations and prohibitions related to their consumer debt collection activities. Violations of any of these obligations or prohibitions can lead to the consequences we discuss below. With this in mind, some of the most common FDCPA violations include:

Inadequate Consumer Debt Collection Disclosures

The FDCPA requires disclosure of “validation information” early in the debt collection process—either in the original debt collection communication or within five days of the initial communication. Organizations that are subject to the FDCPA may send validation information by mail or electronically. Required disclosures under the FDCPA include:

  • A statement that the communication is from a debt collector
  • The debt collector’s name and contact information
  • The name of the creditor to which the debt is owed and the associated account number
  • The current amount of the debt owed at the time of the communication
  • An itemization of the debt owed, including any interest, fees, payments, and credits applied
  • How the consumer can respond to the communication
  • The end date for the 30-day period the consumer has to dispute the subject debt

While experienced debt collectors will typically have form letters that they send with their initial debt collection communications, those with less experience may not be aware of their disclosure obligations, and flaws in organizations’ internal systems and protocols can lead to disclosure violations. In all cases, nondisclosure presents substantial risks, and organizations facing allegations of nondisclosure must work with their counsel to assess their compliance and determine what defenses they have available.

Inappropriate Contact (Time and Place Violations)

The FDCPA restricts the time and place at which debt collector calls are allowed. As summarized by the CFPB, these restrictions generally prevent debt collectors from contacting consumers “before 8 a.m. or after 9 p.m.;” and, regardless of time, if a consumer informs a debt collector that it is calling at an inconvenient time, the debt collector is “required to terminate the call.” Additionally, debt collectors are prohibited from contacting consumers at work if they have “reason to know” that consumers are not allowed to receive personal communications during work hours.

Consumer Harassment

Along with prohibiting debt collection efforts during inconvenient times and in inconvenient locations, the FDCPA also prohibits harassing communications regardless of time and place. Under the FDCPA, it is illegal for debt collectors to:

  • Make repeated calls or send repeated messages with the intention of harassing, oppressing, or abusing
  • Use obscene or profane language
  • Threaten violence or any other form of harm
  • Publish a consumer’s name, address, or contact information
  • Contact a consumer without informing the consumer that they are a debt collector

False, Deceptive, and Misleading Debt Collection Practices

Like other federal consumer protection laws, the FDCPA prohibits businesses and other organizations from engaging in false, deceptive, or misleading practices. Under the FDCPA, it is unlawful to make any of the following misrepresentations when engaging in debt collection activities:

  • Misrepresenting the amount owed
  • Misrepresenting that the debt collector is an attorney or law firm
  • Misrepresenting that the consumer can be arrested for failing to pay
  • Threatening other actions that are illegal under state or federal law
  • Threatening any actions that the debt collector has no intention of taking

Social Media, Text Message, and Email Communications

As the CFPB explains, “[a] debt collector may not use social media to publicly post about a debt . . . . However, they can contact [consumers] privately on social media, unless [consumers] request that they not contact [them] that way.” Additionally, while debt collectors can communicate with consumers via social media, text message, and email generally, debt collectors must also provide consumers with a “reasonable and simple” method to opt out of these forms of communication.

Direct Communications with Represented Consumers

Once a debt collector knows, or “can easily find out,” the name and contact information of a consumer’s attorney, the debt collector must communicate with the consumer’s attorney instead of contacting the consumer directly. As with all FDCPA violations, continuing to contact represented consumers can expose debt collectors to both civil liability and administrative enforcement.

Consequences of Noncompliance with the FDCPA

Businesses and other organizations that violate the Fair Debt Collection Practices Act can face significant consequences. This makes compliance essential; and, when facing allegations or scrutiny under the FDCPA, organizations must be prepared to affirmatively demonstrate compliance to avoid unnecessary penalization.

The consequences of violating the FDCPA broadly fall into two categories: (i) civil liability in private right of action litigation; and, (ii) administrative or civil penalties under the Federal Trade Commission Act (FTC Act).

1. Civil Liability in Private Right of Action Litigation

The FDCPA gives consumers a private right of action to pursue civil litigation for the violations listed above (among others). In private right of action cases under the FDCPA, consumers can seek either actual damages or statutory damages of up to $1,000 per violation, plus recovery of their attorneys’ fees and costs. Since the damages in civil litigation under the FDCPA are generally fairly low (although debt collectors that commit multiple or repeated violations can face significant exposure in single-plaintiff cases), class action cases under the FDCPA are common.

2. Administrative or Civil Penalties Under the FTC Act

Along with facing civil liability in private right of action litigation, businesses and other organizations that violate the FDCPA can also face administrative or civil penalties in federal enforcement actions. Under 15 U.S.C. Section 1692l, violations of the FDCPA also constitute unfair or deceptive acts or practices under the FTC Act—which means that the FTC can seek to impose both administrative penalties and civil fines of more than $50,000 per violation.

While compliance with the FDCPA is fairly straightforward in many instances, debt collectors and other organizations can easily commit violations if they are not careful. As a result, a comprehensive approach to compliance and internal training of all relevant internal personnel is critical. At Oberheiden P.C., we assist debt collectors and other organizations with all aspects of consumer protection compliance, and we serve as defense counsel for private right of action litigation and federal enforcement actions as well.

Schedule a Confidential Consultation at Oberheiden P.C. Today

If you have questions about your organization’s obligations under the FDCPA, or if your organization is facing litigation or enforcement action related to its debt collection practices, we invite you to get in touch. Please call 888-680-1745 or contact us online to schedule a free and confidential consultation at Oberheiden P.C. today.

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