Debt Collection Laws An Overview

The main law a creditor must comply with when collecting a debt is the Fair Debt Collection Practices Act (FDCPA). Congress enacted this law in 1977 to protect the interest of debtors.

The Purpose of the FDCPA is to:

1. Eliminate abusive, deceptive and unfair debt collection practices

Debt collectors may not call you to collect a debt at inappropriate hours of the day, use inappropriate language or lie when speaking to a debtor.
2. Make sure that debt collectors who do not use abusive debt collection practices are not at a competitive disadvantage

Previously, if debt collection firm ""A"" wanted to use good practices to collect debts by not abusing debtors, they might collect less debts than debt collection firm ""B"" who did abuse the debtors (i.e., using threats). So, someone who wanted to collect a debt would have been more likely to hire firm ""B' who had a better track record in collecting debts, even though firm ""A"" is using better practices by not abusing debtors. This law prevents that competitive disadvantage that firm ""A"" would have against firm ""B.""
3. Encourage similar State laws that protect consumers against debt collection abuse.

Passage of the federal laws encourage New York City to pass even more stringent laws against debt collection abuse.
Who Does the FDCPA Apply To?

FDCPA applies only to third parties who are acting on behalf of a creditor. The FDCPA does not apply to first party creditors or lenders collecting their own debts. Even if you are a single person collecting a debt on behalf of someone else, and you are not in the business of collecting debts on a regular basis, you should probably take steps to follow the FDCPA to avoid any unnecessary claims against you.

However, if a creditor collecting his/her own debt harasses or threatens the debtor he/she may be charged with a criminal act under State penal laws. This includes both acts of physical violence and a threat of criminal prosecution against the debtor.

For example, if a debtor does not pay his debt, and the creditor uses threats of physical violence against the debtor in an effort to collect his debt, the creditor may be charged with committing a criminal act.

Also, if a debtor commits an illegal act or fraud in order to obtain a loan or financing, and the debtor does not pay the creditor, the creditor cannot threaten to report, or report the debtor's underlying criminal act to the authorities.

There is one exception that creditors need to watch out for. If you use an assumed name or pretend to be a debt collector in order to collect your own debt, then you have to comply with the FDCPA."

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