Fair debt collection practices

     While many creditors collect or attempt to collect overdue debt in-house, many creditors (especially doctors, hospitals, and other medical service providers) assign such debt for collection to a third-party debt collection business, often referred to as a collection agency.  In a typical case, the collection agency will keep a percentage of any recovery as its fee and remit the balance to the creditor from whom the assignment was received.  There are thousands of collections agencies throughout the United States.   The website of the American Collector's Association provides some useful information about the third-party debt collection business, including a Code of Ethics to which Association members subscribe. 

      Stories of abusive collection agency techniques abound.   In 1977, in response to findings of widespread abuse (apparently undeterred by the threat of tort liability), Congress enacted the Fair Debt Collection Practices Act (FDCPA). The Act prohibits or limits a wide range of collection behavior by collection agencies, or others collecting on behalf of an initial creditor, in connection with the collection of consumer debt, and provides for the recovery of actual and statutory damages. It also permits the recovery of attorneys fees in any successful action to enforce its provisions, thus facilitating the financing of litigation by consumer debtors who might not otherwise be able to afford legal assistance.  Some states further regulate collection agencies doing business in the state or also regulate creditors collecting in-house.  See, e.g. The Robbins-Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code 1788.1 et. seq.   

     Collection agencies typically attempt to collect unsecured debt.  However, the FDCPA also applies to the collection of consumer secured debt. For example, a business engaged in repossessing automobiles on behalf of a lender may not . . . "[Take or threaten] to take any nonjudicial action to effect dispossession or disablement of property if - there is no present right to possession of the property claimed as collateral through an enforceable security interest . . ." Section 808(6)(A), 15 U.C.S.A. 1692f. Thus, a repossessor committing a breach of the peace in the course of a repossession (even if the debt is owing), or repossessing when the debt is not in default, faces liability under the Act in addition to tort liability for conversion. We explore the concept of breach of the peace and attendant tort liability in Commentary.Self help repossession.

     Detailed consideration of the FDCPA, and of analogous state legislation, is beyond the scope of these materials. However, the Seventh Circuit opinion in Jenkins v. Heintz draws your attention to the important implications of the FDCPA for your work as a lawyer.  The American Collectors Association presents a useful summary of the key provisions of the Fair Debt Collection Practices Act at this portion of its web site.  Pursue this link if you are interested in the full text of the Act.