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The Fair Debt Collection Practices Act (FDCPA) is a federal law that Congress added to the the Consumer Credit Protection Act. It was originally passed in 1978 but has been significantly amended since then. The purposes of the FDCPA are to eliminate abusive practices in the collection of consumer debts, to promote fair debt collections, and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information’s accuracy. The FDCPA is best understood in two parts: (1) prohibitions on certain debt collection techniques, and (2) a set of affirmative duties imposed on debt collectors. The other significant section of the FDCPA lists penalties that could be imposed on a debt collector for violating the FDCPA.
PROPERTY MANAGERS ARE DEBT COLLECTORS
The FDCPA applies to all “debt collectors,” defined as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” Consequently, nearly all residential property managers who collect back rent or damages from residential tenants will be considered debt collectors, subject to the FDCPA.
Similarly, residential tenants are “consumers” and unpaid rent and damages owed under a residential lease are “debt” under the FDCPA. By contrast, debts owed by a business (or by individuals for business purposes) are not subject to the FDCPA.
THINGS YOU MUST NOT DO
The FDCPA prohibits certain types of “abusive and deceptive” conduct by a debt collector when attempting to collect debts. Here are the basic rules governing such prohibited activities:
- Hours for Phoning a Debtor. Only call a debtor by telephone between 8:00 A.M. & 9:00 P.M. local time.
- Stop Means Stop! Generally, when a debtor requests the debt collector to stop contacting the debtor, all communications must stop. The debt collector can advise that collection efforts are being terminated or that the debt collector intends to file a lawsuit or pursue other lawful remedies.
- Do Not Annoy the Debtor. A debt collector must avoid all conduct that is intended to annoy, abuse, or harass a debtor.
- Do Not Call the Workplace. If a debtor asks a debt collector to refrain from contacting the debtor at his/her place of employment, the debt collector must comply.
- Call the Attorney. If the debtor gets an attorney, talk only with the attorney.
- Do Not Talk to Strangers. A debt collector cannot talk with anyone about a debt, except the debtor and his/her attorney. The debt details and the debtor’s identity must be kept confidential.
- Do Not Try Tricks. Misrepresentations and deceit are strictly prohibited by the FDCPA.
- Do Not Threaten. A debt collector can explain that a collection lawsuit will result because of the debtor’s failure to pay the bad debt, but avoid all other threats or forms of intimidation.
- Keep it Clean. Abusive or profane language is prohibited.
This is not an exhaustive list of prohibited activities, and every debt collector should develop or adopt a Compliance Manual or a set of Standard Operating Procedures that every employee is required to read and agree to follow. Those SOP’s should be detailed and ordinarily must be modified to fit the particular business operations of each property management company.
THINGS YOU MUST DO
The FDCPA requires a debt collector to do these things:
- Mini-Miranda Warning. In every communication, the debt collector must state that the communication is from a debt collector (identifying the debt collector by name), and in the initial communication, that any information obtained will be used to effect collection of the debt. This is referred to as the Mini-Miranda Warning, and the attorneys at GRIFFITH LAW GROUP LLC recommend that the warning be given in every communication with the debtor, both verbal and written.
- Validation Notice. A Validation Notice, also called a Dunning Letter, must be sent to the debtor within five (5) days of the initial attempt to collect the debt. Indiana is situated in the Seventh Circuit, where the federal Court of Appeals has detailed what the FDCPA requires of each Validation Notice. The attorneys at GRIFFITH LAW GROUP LLC recommend that debt collectors carefully craft Validation Notices to comply with the Seventh Circuit Court of Appeal’s suggested dunning letter language.
ENFORCEMENT OF THE FDCPA
You could be sued by the Federal Trade Commission for violating the FDCPA, but that is unlikely. Rather, it is far more likely that a tenant will hire a private attorney who utilizes the FDCPA as a means of avoiding the tenant’s obligations under the lease. Debtors can file a counterclaim in an eviction lawsuit in state court or even a separate lawsuit in a state or federal court to collect damages (actual, statutory, attorney’s fees, and court costs) from a debt collector. The FDCPA imposes strict liability on debt collectors, which means that a debtor need not prove actual damages in order to claim statutory damages of up to $1,000, plus reasonable attorney’s fees.
TRAINING & COMPLIANCE EFFORTS
Every debt collector should have a Compliance Manual and should regularly train staff members on FDCPA compliance matters and office SOP’s. Not only do such measures significantly reduce the likelihood of a violation, but a debt collector in violation of the FDCPA may escape penalty if it can show that the violation was unintentional and the result of a “bona fide error” that occurred despite procedures designed to avoid the error at issue. However, the lack of regular training, Compliance Manuals and SOP’s virtually eliminate the chance of escaping penalties for an unintended violation.
HOW WE CAN HELP
The attorneys at GRIFFITH LAW GROUP LLC have developed a Compliance Manual and training program for property managers and other debt collectors. We routinely train property management staff on FDCPA compliance matters and assist clients in developing SOP’s that balance compliance concerns, and business and operational needs. If we can assist you in learning more about the FDCPA and its impact to your operations, please contact us.