Collection of Consumer Debt

Collection of Consumer Debt in the United States

Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection of Consumer Debts

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act), all covered persons or service providers are legally required to refrain from committing unfair, deceptive, or abusive acts or practices (collectively, UDAAPs) in violation of the Act.

Personal Collection of Consumer Debt

The Dodd-Frank Act prohibits covered persons or service providers, including first-party and third-party debt collectors, from committing or engaging in unfair, deceptive, or abusive acts or
practices (collectively, UDAAPs) while collecting or attempting to collect consumer debts. In addition, the Fair Debt Collection Practices Act (FDCPA) prohibits third-party debt collectors and others subject to that Act from, among other practices, communicating with a consumer at any time or place that is known or which should be known to be inconvenient to the consumer, or at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication, from communicating with any person other than the consumer (and other specified parties, except in certain circumstances) in connection with the collection of any debt other than to acquire location information in accordance with the Fair Debt Collection Practices Act, from “us[ing] unfair or unconscionable means to collect or attempt to collect any debt,” and from “engag[ing] in any conduct the natural consequences of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” (15 U.S.C. §§ 1692b, 1692c, 1692d, and 1692f)

Dodd-Frank Act

First-party and third-party debt collectors may run a heightened risk of committing unfair acts or practices in violation of the Dodd-Frank Act (See Dodd-Frank Act, §§ 1002, 1031 & 1036(a), codified at 12 U.S.C. §§ 5481, 5531 & 5536(a)) when they conduct inperson debt collection visits, including to a consumer’s workplace or home. An act or practice is unfair under the Dodd-Frank Act when it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or competition.

Original creditors and other covered persons and service providers under the Dodd-Frank Act
involved in collecting debt related to any consumer financial product or service are subject to the prohibition against UDAAPs in the Dodd-Frank Act. It is also prohibited for any person, even if not a covered person or service provider, to knowingly or recklessly provide substantial assistance to a covered person or service provider in violating section 1031 of the Dodd-Frank Act. (See Dodd-Frank Act, § 1036(a)(3), 12 U.S.C. § 5536(a)(3)). The principles of “unfair” and “deceptive” practices in the Act are informed by the standards for the same terms under Section 5 of the Federal Trade Commission Act (FTC Act).

Depending on the facts and circumstances, in-person collections may cause or may be likely to cause substantial injury to consumers. For example, in-person collection visits may result in third parties, such as consumers’ co-workers, supervisors, customers, roommates, landlords, or neighbors learning that the consumers have debts in collection. When such information is revealed to such third parties, it could harm the consumer’s reputation and, with respect to in-person collection at a consumer’s workplace, result in negative employment consequences.

In addition, depending on the facts and circumstances, in-person collection visits may result in
substantial injury to consumers even when there is no risk that the existence of the
debt in collections will be disclosed to third parties. Such injury may result when, for
example, a collector goes to a consumer’s place of employment when the consumer’s
employer prohibits the consumer from having personal visitors there, which could
also result in negative employment consequences. As with other types of collection,
in-person visits may also be likely to cause substantial injury to a consumer if, based
on the facts and circumstances, a likely or actual consequence of the visits is to
harass the consumer.

Fair Debt Collection Practices Act (FDCPA)

In addition to the prohibition of UDAAPs under the Dodd-Frank Act, the Fair Debt
Collection Practices Act (FDCPA) also makes it illegal for a person defined as a “debt
collector” from engaging in conduct “the natural consequence of which is to harass,
oppress, or abuse any person in connection with the collection of a debt,” (FDCPA § 806, 15 U.S.C. § 1692d) to “use any false, deceptive, or misleading representation or means in connection with the collection of any debt,” (FDCPA § 807, 15 U.S.C. § 1692e; this provision also imposes affirmative obligations on “debt collectors” under the FDCPA when collecting consumer debts) or to “use any unfair or unconscionable means to collect or attempt to collect any debt.” (FDCPA § 808, 15 U.S.C. § 1692f). This provision also imposes affirmative obligations on “debt collectors” under the FDCPA when collecting consumer debts.

The FDCPA generally applies to third-party debt collectors, such as collection agencies, debt purchasers, and attorneys who are regularly engaged in debt collection. (See FDCPA § 803(6), 15 U.S.C. § 1692a(6)). The FDCPA also covers, as a “debt collector,” a creditor who, in collecting its own debts, uses any name other than its own which would indicate that a third person is
attempting to collect the debts.

Therefore, parties subject to the Fair Debt Collection Practices Act who engage
in in-person collection visits may violate a variety of Fair Debt Collection Practices Act provisions.

First, section 8os(a)(l) and (3) of the Fair Debt Collection Practices Act makes it illegal for third-party debt collectors and others subject to that Act to communicate with a consumer in
connection ·with the collection of any debt “at any unusual time or place or a time or
place known or which should be known to be inconvenient to the consumer” or “at
the consumer’s place of employment if the debt collector knows or has reason to
know that the consumer’s employer prohibits the consumer from receiving such
communication.” Consumers may find in-person collection visits to be inconvenient
and collectors may know or should know of this inconvenience; similarly, collectors may know or have reason to know that a consumer’s employer prohibits theconsumer from receiving such communication at the workplace.

For example, a consumer may indicate that an in-person collection visit to a consumer’s workplace would be likely to disrupt the consumer’s workplace, interfere with the consumer’s
ability to do his or her job, or is prohibited by the consumer’s employer. In-person
collection visits therefore may pose a heightened risk of collectors violating section
805(a)(1) and (3) of the Fair Debt Collection Practices Act.

Second, subject to certain exceptions, section 805(b) of the Fair Debt Collection Practices Act prohibits thirdparty debt collectors and others subject to that Act from communicating with any
person other than the consumer in connection with the collection of any debt. Depending on the facts and circumstances, in-person collection visits may result in collectors communicating with others about the debt in violation of section 805(b).s

Finally, sections 8o6 and 8o8 of the Fair Debt Collection Practices Act prohibit, respectively, a debt collector from engaging in any conduct the natural consequence of which is to harass,
oppress, or abuse any person, and from using unfair or unconscionable means to collect or attempt to collect any debt. In-person collection visits may pose a heightened risk that collectors will violate these provisions.


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