A Review of Debt Collection Laws and the Fair Debt Collection Practices Act

Have you even received a phone call or dunning letter from a creditor or collection agency? Whether you fell behind on your financial obligations or simply forgot to pay a bill one month, you probably have received a friendly reminder about the money you owe.

Most companies in the business of debt collection adhere to the Fair Debt Collection Practices Act, which are the laws that govern their behavior. Among other things, the Act prevents bill collectors from employing abusive tactics to pressure debtors into satisfying an obligation. For example, the Act prevents debt collectors from threatening a debtor with certain criminal prosecution, making excessive phone calls, certain third-party communication, etc. However, it is hard ball tactics which are often a bill collector’s best friend and employ the necessary pressure. In addition, the bill collectors are typically paid a commission on the debts the successfully collect. Consequently bill collectors often find themselves walking a fine line between regulatory compliance and illegal debt collection activities.

One debt collection agency which formerly did business in West Virginia jumped way beyond that line with their ultra aggressive debt collection activities and found themselves in federal court litigation. Specifically, the case of West v. Costen provided a prime example of how not to collect a debt. The case involves a class action lawsuit against named defendant William C. Costen.

One of the plaintiffs successfully proved that the defendant unlawfully contacted third parties about a debt. The FDCPA prohibits certain third-party contact which is designed to protect the debtor’s reputation and prevent the debt from losing a job. This can be most troublesome for a debtor if a bill collector continually contacts the debtor’s employer.

A debt collector may legally contact an employer but certain limitations apply and they must cease any communication once the debtor advises them to stop contacting him or her in that manner. In the West lawsuit, one plaintiff successfully proved that a bill collector illegally communicated with his teenage daughter and another proved that the defendant unlawfully communicated with his grandparents and uncle.

In addition to the above, the plaintiffs alleged more humiliating types of conduct. Specifically that the defendants violated section 1692e(4-5) of the act which prevents debt collectors from using any false, deceptive, or misleading representation or means in connection with the collection of any debt and the representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person.

Specifically, the plaintiff alleged to have received a payment demand notice which indicated that a criminal warrant was pending. In addition, that the bill collector told the plaintiff that she would have a warrant issued for her arrest unless she paid her debt. The court failed to grant summary judgment on those issues since the defendants were collecting dishonored checks and it was possible to pursue criminal prosecution for such activity.

The case also includes a detailed discussion of other provisions of the FDCPA including the validation of debts, collection of service charges, and piercing the corporate veil.
In summary, if you have been contacted by a bill collector and feel that they may have stepped over the line, you may want to reference the Fair Debt Collection Practices Act and also the case of West versus Costen.

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