Pre-Bankruptcy Protection: The Fair Debt Collections Practices Act

Some time ago the Washington Post reported that a Southern California debt collection firm was shut down by the Federal Trade Commission for violating debtor harassment laws. This story was especially newsworthy because of the outrageous conduct by the collection company, including threats against a family pet and digging up a corpse!

The FTC shut down this company and froze its assets. The company’s owners were charged with violating the Federal Trade Commission Act and Fair Debt Collection Practices Act. The FTC alleged that a collector for the company unlawfully threatened a woman who owed money on her daughter’s funeral bill. She was told that they were going to dig up the body and hang her from a tree if she didn’t pay. She was also told that they would take her dog and eat it.

The Fair Debt Collections Practices Act, or FDCPA, protects consumers from abusive collections practices and outrageous threats by third party collectors. Third party collectors include collection agencies and collection attorneys. The FDCPA does not apply to business debts or to original creditors. Under the FDCPA the collector must state that the communication is from a debt collector and that any information obtained may be used to collect the debt. This is known as the mini-Miranda by debtor collector. Additionally, the debt collector must provide certain information concerning the debt, including:

  • The amount of the debt;
  • The name of the creditor (and original creditor);
  • That the debt will be assumed valid unless you dispute the debt within thirty days; and
  • That if you dispute the debt, the debt collector must provide verification of the debt.

The FDCPA prohibits certain abusive practices including:

  • Requesting payment beyond what is actually owed;
  • Using abusive, profane or obscene language;
  • Threatening legal action which is not permitted by law (e.g. criminal action);
  • Telephone calls at work after being instructed that your employer prohibits phone calls from debt collectors;
  • Contacting you directly after being instructed that you are represented by an attorney
  • Contacting a third party who does not owe the debt;
  • Making a false threat of civil or criminal legal action;
  • Contact by embarrassing media, such as a postcard or telegram;
  • Making repeated telephone calls or calls at unreasonable times (before 8:00 AM or after 9:00 PM); or
  • Making phone calls to an inconvenient place (e.g. contacting you at work in violation of your employer’s policy).

When you hire a bankruptcy attorney, the FDCPA prohibits third party collectors from further contact with you directly. The collector can only communicate with your attorney. Consequently, the FDCPA provides immediate relief from collector harassment while you prepare to file your bankruptcy case. While the FDCPA does not prevent a lawsuit, repossession, or foreclosure, the involvement of a bankruptcy attorney usually delays these processes. A violation of the FDCPA is a serious matter and may be litigated in federal or state court. The statute provides for a civil penalty of up to $1,000 and attorney fees.

If you are being harassed by creditors for bills you cannot pay, speak with an experienced bankruptcy attorney and consider your options. Hiring a bankruptcy attorney will stop these harassing calls from third party collectors, and a bankruptcy discharge will eliminate the troubling debt permanently.