FDCPA Frequently Asked Questions and Most Asked Questions
- Can collectors demand payment or take legal action during the 30-day dispute period?
- What does “Acquiring Location Information” mean and include?
- Can debt collectors write or call my employer?
- Is a collection letter with the heading “IRS Statutory Notification Letter Form 1099” legal?
- Can debt collectors demand full payment when creditors will accept partial payments?
- Can debt collectors add interest, fees, and other charges to the original debt?
- Are debt collectors allowed to report charged-off debts to a CRA during the 30-day dispute period?
- Can collectors report charged-off debts to CRAs after receiving my dispute letter but before validating the debt?
- I disputed a debt but never heard back, I thought they had to validate the debt?
- How are collectors supposed to validate debts? Aren’t they supposed to mail me verification?
- Can collectors charge for copies and mailing costs when verifying debts?
- Are business or commercial debts covered by the FDCPA?
Want more answers, or to know whether the debt collector may be liable TO YOU for statutory damages of up to $1,000, PLUS any actual damages suffered, PLUS attorney fees?
Can debt collectors demand payment or take legal action during the thirty (30) day period for disputing a debt?
YES! When consumers have not notified the collection agency in writing that the debt is disputed, Section 809(b) permits collectors to continue collection activity including demands for payment and taking legal action.
The FDCPA treats the thirty-days as a dispute period within which the consumer (debtor) may insist that the collector verify the debt and not a grace period that prohibits collection efforts.
However, the collection agency must ensure its collection activity does not overshadow and is not inconsistent with the disclosure of a consumer’s right to dispute the debt as specified in Section 809(a).
Finally, once you dispute a debt in writing, ALL collection actions must cease until the collector validates the debt in accordance with Section 809.
The 30-Day Rule Dispute Rule
The 30-day rule confuses a lot of people. I see it misinterpreted all the time, especially on-line! The 30 day rule is a time limit Congress put in the FDCPA to give debtors time to gather information before responding to a collector’s debt notification or dunning notice.
WARNING! The 30 day rule does not prohibit collectors from pursuing collection actions while waiting for debtors to respond. Collectors must cease collection efforts ONLY AFTER receiving “dispute letters” from debtors. Let me say that again… The 30-day rule does not apply to collectors!
If collectors intend to pursue collection activities AFTER you’ve disputed the debt, they must follow the FDCPA rules and validate the debt by obtaining documents and proof from the original creditor and then sending these documents to you.
” Section 809(b) [15 USC 1692g] If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”
Notice the use of the word “or” in the statement …”until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment…”
In many cases, the creditors fail to respond in a timely manner for a variety of reasons; lost records, deleted accounts, sold/transferred debts, account too old and so forth when collectors request information. I’ve seen it take 14 months before a collector was able to respond to a dispute letter. There is no time limit on responding as long as the collector’s response includes proper validation of the debt.
Quite often collectors are unable to obtain the validation required by the FDCPA so they drop the account (usually by selling it to another collector). When they do this, they are NOT required to inform you of this so you never hear from them again. However, you will hear from the new collector who purchased the account. When this happens repeat your dispute.
Visitors to this site often ask me what they should do when they have disputed a debt and the collector responds by sending a summons to appear in court.
My answer is to APPEAR IN COURT! Not appearing will more than likely result in the collector winning a default judgment against you.
If you disputed the debt in writing within 30 days of receiving the dunning notice (and not from the date of the letter or postmark) then go to court prepared to show the judge proof of your dispute and mention that the collector failed to respond with the proper validation as required in the FDCPA. Provide certified copies of all documents backing up your story. Usually, the judge will stop the hearing and order the collector not to return until complying with the validation requirements of the FDCPA.
Remember, collectors can pursue collection actions, including court action, while waiting on you to dispute a debt. Some collectors send dunning letters and, at the same time file, for a court judgment. This is why it’s imperative that you dispute the debt immediately.
[15 USC 1692a] Section 803(7) Definitions:
“The term “location information” means a consumer’s place of abode and his telephone number at such place, or his place of employment.” Acquiring location information does not include salaries, pay dates or any other personal or work-related information.
[15 USC 1692b] Section 804 Acquisition of location information:
Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall:
(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
Note: Congress intended 804(1) to protect you from “serious invasions of privacy as well as the loss of your job”.
(2) not state that such consumer owes any debt;
(3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) not communicate by post card;
(5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
(6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.
Collectors who have not previously contacted your employer can send a letter asking for verification of your employment and location only. Asking for pay or other personal information is prohibited!
Also, they must not send written messages that are easily accessible to third parties, such as computerized billing statements that can be seen on the envelope itself or that violates section 805 (5). This section also prohibits debt collectors, when seeking location information from third parties, from using their actual name in their letterhead or elsewhere in a written communication, if the name indicates collection activity (such as a name containing the word “debt,” “collector” or “collection”)
Assuming the collector previously contacted your employer by phone to verify your place of employment, then Section 804(3) prohibits communicating with that employer again for the same purpose.
I received a collection letter with the heading “IRS Statutory Notification Letter – Publication 908.” and it referenced IRS Form 1099 – is this legal?
According to the FTC’s interpretation, this clearly violates section 807(5) False threats of legal action
A typical scenario: You receive an official looking letter that reminds you of a debt you have not paid. It then refers to the creditor’s “right to forgive this debt and submit a Form 1099 to the Internal Revenue Service on all bad debt accounts.” The last sentence usually reassures you that the creditor does not intend to take such an action at this time, and then urges you to remit payment to “avoid any additional collection activity.”
In general, Form 1099 is used to report additional income. Let’s say you owe a creditor $10,000 and the creditor files a Form 1099. This would mean that you, in theory, must report the $10,000 as income on your federal tax return.
The IRS does not require creditors who discharge debts to file a Form 1099, no matter how much the debt is worth. Second, although implied, creditor rarely file Form 1099 even when the debt remains unpaid.
Thus, the official looking letter you receive creates the distinct but false impression that the collection agency is required by the IRS or by a statute administered by the IRS to send that dunning letter to you. Since this is not true, the representation violates Section 807(10). This, in turn, may create the additional false impression that the IRS has been informed about the debt at issue, also in violation of Section 807(10).
The whole intent behind the letter is to scare you into paying the debt but since the filing of such a form is never the result of a failure to pay and since the creditor does not ever intend to file such a form, a representation to the contrary, such as in the letter you receive, violates section 807(5).
Additionally, section 807(9) prohibits documents that fraudulently appear to be officially authorized by the government or otherwise mislead the recipient as to their authorship. The purpose of this section is to discourage debt collectors from attempting to use the authority of the government deceptively to scare consumers into paying the debt at issue. Thus, dunning consumers with letters that look like government documents violates both the letter and the spirit of this provision.
Can debt collectors demand full payment even though they know the agency or creditor will in fact accept partial payments?
A collector may ask for full payment. However, if you suggest a partial payment and the collector, knowing that the agency or creditor will accept partial payment, tells you that only full payment is acceptable, the collector has clearly violated Section 807 (10) of the FDCPA which, “prohibits the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.”
Can debt collectors add surcharges (interest, fees, charges or expenses) to the original debt?
Section 808(1) prohibits collecting any amount unless the amount is expressly authorized by the agreement creating the debt or is permitted by law.
1. Kinds of amounts covered. For purposes of this section, “amount” includes not only the debt, but also any incidental charges, such as collection [53 Fed. Reg. 50108] charges, interest, service charges, late fees, and bad check handling charges.
2. Legality of charges. A debt collector may attempt to collect a fee or charge in addition to the debt if either:
(a) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or
(b) the contract is silent but the charge is otherwise expressly permitted by state law.
Conversely, a debt collector may not collect an additional amount if either:
(a) state law expressly prohibits collection of the amount or
(b) the contract does not provide for collection of the amount and state law is silent.
3. Legality of fee under state law. If state law permits collection of reasonable fees, the reasonableness (and consequential legality) of these fees is determined by state law.
4. Agreement not in writing. A debt collector may establish an “agreement” without a written contract. For example, he may collect a service charge on a dishonored check based on a posted sign on the merchant’s premises allowing such a charge, if he can demonstrate that the consumer knew of the charge.
Are debt collectors allowed to report charged-off debts to a CRA during the 30-day validation period?
YES! Under section 809 “Debt Validation”, debt collectors may accurately report a debt to a consumer reporting agency within the thirty day validation period. (See question #1)
Are debt collectors allowed to report charged-off debts to a CRA after receiving my dispute letter but before validating the debt?
No! The FDCPA requires debt collectors to cease collection of the debt once they’ve received a written dispute within the 30-day validation period and until verification is obtained. Thus, reporting a charged-off debt to a consumer reporting agency, particularly at this stage of the collection process, constitutes “collection activity” on the part of the collector,
Section 809(b) “If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”
Rather than respond the debt collector probably decided to abandon further collection efforts after receiving your dispute letter. There is nothing in the FDCPA that compels debt collectors to respond to a dispute UNLESS they intend to continue collection efforts. More than likely the collector will sell your debt so be prepared for a new collector to contact you.
I received a computerized form called an “itemized statement of services rendered” from a collector. Upon closer examination, the form appeared to be from the collector’s own computer rather than from the creditor that provided the services (I’m familiar with their invoices). I called the original creditor and discovered that only phone verification was provided to the collector, no written documents were ever requested.
Section 809(b) “Validation of the debt” requires debt collectors to obtain verification of the debt from the creditor and mail it to the consumer.
The principal purpose of this section is to help consumers who have been mis-identified by the debt collector or who dispute the amount of the debt. It’s imperative that verification of the identity of a consumer and the amount of the debt be obtained directly from the creditor. Mere itemization of what the debt collector already has does not accomplish this purpose
Can collectors charge for copies of documentation and mailing costs when they verify debts?
NO! The cost of obtaining documentation to validate a debt is considered part of the cost of doing business by the collector and cannot be passed on to consumers. Collectors may not charge you for copies of the documentation of the indebtedness mailed in response to your dispute letter. To do so could constitute an imposition of a fee or service charge in violation of Section 808(l).
15 USC 1692a 5) defines the term “debt” as any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. Thus, debts incurred for business or commercial purposes are not covered by the FDCPA. Small business owners who use personal credit cards to finance their business will likely not be covered under the FDCPA, and credit cards that are issued in the business name and are used exclusively for business purposes would normally be treated as business debt. Use personal credit cards with caution when financing a business.
The FTC recognizes that it may be impractical for an attorney or any other agency suing to collect delinquent balances on a credit card account to distinguish between those debts that are subject to the FDCPA and those that are not. Thus, they could choose to pursue collection under commercial rules as opposed to rules under the FDCPA and you may lose certain protections under the FDCPA by mixing personal and business expenses on credit cards.