Fair Debt Collection Practices Act in the United States

Fair Debt Collection Practices Act and the Statute of Limitations

by Cameron Scott

As lawsuits from collection agencies have skyrocketed, so have Fair Debt Collection Practices Act cases.

A flood of people are seeking legal help with debt collection. As the economy has taken a nosedive, the number of consumers defaulting on their debts has skyrocketed – and so have the number of calls, letters, and lawsuits from collection agencies. Historically, very few debtors fight suits filed against them; most don’t even show up for court. But a growing number are actively defending themselves.

Some are even suing the debt collectors, alleging violations of the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692-1692p), which prohibits overly aggressive tactics, such as making repeated and excessive calls, or collecting beyond the statute of limitations. Three years ago, 319 of these suits were filed in California courts; that number jumped to 1,570 last year.

Eads says that in the troubled economy, a wider range of consumers are exer-cising their legal rights. Some experts also suggest that agencies have become more aggressive as collectors struggle to make ends meet.

But attorneys in the collection industry point to another reason for the uptick in Fair Debt Collection Practices Act cases: the Internet. They say a small but growing class of for-profit consumer attorneys is using hyperbolic online advertising to lure clients. “Consumers are being told that they don’t have to pay their debts,” says Harvey Moore, president of the California Creditors Bar Association.

Industry insiders also allege that some consumer attorneys sue collectors for technical and immaterial violations of the Fair Debt Collection Practices Act.

Victoria Haneman, a professor at the University of La Verne College of Law in Ontario who has also served as general counsel for debt buyers, says that the act can be a “hard statute to comply with.”

Fred W. Schwinn of San Jose’s Consumer Law Center Inc. appears on the other side of these cases, and he says that “people who don’t violate the law don’t get sued.”

Part of the friction around such suits stems from how the attorneys involved get paid. Consumers who win or settle a case can claim damages and attorneys fees, but collectors must prove that a suit is frivolous if they hope to receive payment.

As a result, according to Moore of the creditors bar, “it’s cheaper to settle than it is to fight,” even when a suit lacks merit.

Consumer attorneys, however, note that the statute relies on private enforcement by attorneys who bring these cases at the defendants’ expense so there will be no cost to the government.

La Verne’s Haneman says that although the Fair Debt Collection Practices Act suits don’t always play out perfectly in the courts, the statute provides “equilibrium to the industry.”

“The suits,” she says, “make the collectors aware that there’s somebody out there that may come after them” if they don’t play by the rules.