The collection industry is highly regulated by Federal law, making it very easy for debt collectors to get themselves into legal trouble even if they’re careful. And as precedent law grows and consumer protection advocates push for strict definition and enforcement, it becomes more and more important for debt collectors and accounts receivable managers to understand where good practice ends and illegal practice begins.
There are dozens of ways that Federal regulations can be violated, so it is advisable to become familiar with the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA). However, there are a few common mistakes that collectors make on a regular basis – getting them into unwanted legal tangles:
One of the most common mistakes made by debt collectors is exclusion or only partial inclusion of what is known as the mini-Miranda warning, which must convey the following in the initial communication:
“This is an attempt to collect a debt and any information obtained will be used for that purpose. This communication is from a debt collector.”
This regulation gets very tricky because the FDCPA requires a collection agency to identify itself using the mini-Miranda warning; at the same time, it requires that you not disclose the debt to anyone but the correct consumer. If a third party could hear the message, you’ve committed a third party disclosure violation.
Another dangerous tactic involves making threats of legal action or litigation when you are incapable or do not intend to carry out the threat.
For example, a collector threatens a wage attachment and to “put a lien” on the debtors income tax refund, then threatens to serve legal process on the debtor at his/her place of employment – neither of which they intend to follow through on. http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm#807
Some collectors resort to contacting employers and other third parties in an attempt to collect from a debtor’s assets or wages. Disclosing private information regarding a debt or the debtor to a third party without the consumer’s prior consent to the debt collector, is a big “no-no” under the FDCPA. http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm#805
While most collectors are aware of legal calling hours, many implement systems or processes that violate the TCPA requirement that no calls can be made before 8:00 a.m. or after 9:00 p.m. Calling or running dialing protocols outside of legal hours can be risky and expensive, considering violations entitle the plaintiff to collect damages directly for $500 to $1,500 per violation, or recover actual monetary loss, whichever is higher.
Another fine line that is commonly crossed by collectors has to do with causing a debtor’s phone to ring or engaging the debtor in telephone conversation repeatedly or continuously – to the point that the debtor (or more importantly, a state court) might consider the activity harassment or abusive. This is also prohibited conduct under the requirements of the FDCPA. http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm#806
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