Especially in the difficult financial situation of the past several years, many Americans have found themselves dealing with unmanageable levels of debt. There are a number of options available to both creditors and debtors to deal with this undesirable situation, but if you have customers who are in default or behind on payments, there are some important regulations in place that govern how these individuals can be treated.
It is essential for businesses to be aware of the consumer protection laws that are in place, because violations of these regulations could have serious repercussions on a business or business owner.
Consumer protection at the federal level
The Fair Debt Collection Practices Act (FDCPA) is included in the United States Code under Title 15 § 1692 and was first enacted in 1977. It is designed to:
- Prevent abusive collection practices for consumer debt
- Provide a way for consumers to dispute and validate debt information in terms of accuracy
- Provide guidelines for the legal conduct of debt collectors
- Establish penalties and sanctions for violators
- Codify the rights of consumers in reference of debt collection
Individual consumer protection
The FDCPA, as applied in many situations, covers personal, family, and household debt including credit card debt, auto loans, and medical care debt. It polices the conduct of third-party debt collectors, who may be any person who regularly collects debts and may include lawyers. It does not include internal collectors of the creditor. Under most laws, a debt collector may only contact a debtor between 8 am and 9 pm, and may not call at the place of work if the employer does not allow it. If the debtor tells the debt collector in written form to stop calling, the debt collector may only contact a debtor to provide additional information, such as the intention to sue. A debt collector may also not inform anyone except the debtor that money is owed.
The FDCPA cannot be used to erase debt, but when debt collectors act in ways which violate the FDCPA, issue false statements, or engage in other illegal practices as defined under the Act, then a debtor may be able to file a private lawsuit citing FDCPA consumer protection violations.