Definition of the Fair Debt Collection Practices Act
The Fair Debt Collection Practice Act (FDCPA) is a federal law approved in 1977 that legally protects debtors from abusive, threatening, and unfair debt collections performed by third-party debt collectors. The act applies to what would be considered consumer debts – those debts accrued for personal, family, or household use. An example of consumer debts would be things like credit card debt, late mortgage payments, cell phone bills etc. Business and agricultural debts are excluded from the FDCPA.
In general, the FDCPA only applies to third-party debt collectors meaning the behavior of individuals looking to collect a personal debt lies outside its scope. It should be noted however that in some states the FDCPA can also be applied to the original creditors.
The FDCPA lays out a set of debt collection regulations that, if violated, can result in a suit being taken against the debt collector. Another element of the FDCPA is the provision of an avenue for consumers to validate and even dispute information about a debt. In doing so, the FDCPA ensures the accuracy of debt information.
Key Elements of the FDCPA
The FDCPA outlines a set of behaviors and actions debt collectors must do. They include:
- Identification: Debt collection agencies must let the debtor know that they are a debt collector. Furthermore, they must make it clear to the debtor that any information they obtain over the course of the collection call can be used to collect the debt.
- Dispute: the debt collector must make the debtor aware that they are within their rights to dispute the debt claim.
- Original Creditor Details: The debt collector must clearly state the name and address of the original creditor and where the debt originated.
- Debt Verification: The debt collector must afford the consumer the chance to request debt verification. This notice must be provided to the consumer within 5 days of the first contact. If the debtor does request proof of the debt, the debt collector must provide proof of the debt which usually comes in the form of a receipt or report. Until this proof is provided, the debt collector is not allowed to make any contact with the debtor.
The FDCPA also outlines a list of actions and behaviors which are prohibited. They include:
- Harassment and Abusive Behavior: The act clearly states debt collectors can not use the threat of violence in their debt collection efforts. Obscene and profane language is prohibited.
- Debt Publication: Publicly posting notice of a consumer’s debt is forbidden. The only exception here is if the information is posted to a consumer reporting agency or shared with employees within the collection agency.
- Repeated Phone Calls: It is prohibited to cause the debtors phone to ring repeatedly for the purpose of harassment.
- Misrepresentation: Debt collectors can not imply that they are affiliated with the United States government. Further, any badge used to support these claims is prohibited. Neither can debt collectors claim they are attorneys.
- Threat of Prison: Debt collection agencies can not make the claim that failure to pay the debt will result in imprisonment. There is no debtor’s prison in the United States.
- Contact after Refusal to Pay: Debt collection agencies are forbidden from contacting debtors who refuse to pay. While legal action is a very real possibility in such a situation, further contact with the debtor is considered harassment.
- No Early or Late Calls: Debt collectors are not allowed to call debtors before 8 a.m. or after 9 p.m.
- No False Reporting: Debt collectors are prohibited from reporting false information to report agencies or other businesses. They are also forbidden from threatening debtors with the reporting of false information.
The FDCPA Compliance Challenge
Collection contact centers and accounts receivable management (ARM) firms face a tricky balancing act when it comes to maximizing collection revenue and maintaining a high level of service and FDCPA compliance. At larger firms you are talking about thousands of calls every week. It can difficult for companies to monitor all these conversations and ensure their agents are behaving in a compliant manner.
FDCPA Best Practices
To help your company stay the right side of FDCPA compliance and avoid any penalties or fines, we have put together a list of tips and best practices.
- Transcribe Collection Calls: If your company is only monitoring a sample of the collection calls you make, then you are leaving yourself wide open to compliance failure. Look towards tools that enable you to transcribe and monitor every single collection call made.
- Automatic Scoring: Look towards tools that will monitor your calls for you and score them in areas like Mini Miranda language, Right Party Contact language, FDCPA violations, abusive language from either party, and other risky language.
- Employee Training: Train your agents carefully so they never breach FDCPA violations.
- Share Best Practices: If you are tracking 100% of your collection calls, you will quickly be able to pinpoint the top performers in your team. Speech analytics tools can help you here as they will quickly identify the type of language and behaviors used in successful and compliant collections. These are invaluable winning behaviors from your top performers which can be shared around the organization.
Further Reading on FDCPA