Skip to main content

Search

Fair Debt Collection: 2.1 Introduction

The Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 to 1692p, and its implementing rules under Regulation F, 12 C.F.R. Part 1006 (effective November 30, 2021), provide powerful tools for consumers who have been harassed, abused, or treated unfairly by debt collectors. Bringing a claim under the FDCPA involves many different, complex steps. This chapter provides a brief overview of some of the initial steps an attorney must consider when bringing an FDCPA claim.

Fair Debt Collection: 10.1 Introduction

This chapter discusses the specific requirements the Fair Debt Collection Practices Act (FDCPA) imposes on debt collectors under 15 U.S.C. §§ 1692h, 1692i, and 1692j. FDCPA § 1692h addresses the application of payments when a consumer owes multiple debts to a debt collector. FDCPA § 1692i defines the acceptable venues where lawsuits can be filed to collect a debt.

Fair Debt Collection: 10.3.1 Text of FDCPA § 1692i, Legislative History, and Regulations

(a) Any debt collector who brings any legal action on a debt against any consumer shall—

(1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or

(2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity—

Fair Debt Collection: 16.2.4.4.1 Introduction

Deceptive debt collection tactics have been the subject of frequent decisions under state debt collection statutes. Courts often draw on the standards developed under the Federal Trade Commission Act, the Fair Debt Collection Practices Act, and UDAP statutes when applying these provisions.264

Fair Debt Collection: 10.3.2 Where Suit Can Be Filed

This section prohibits a debt collector, including attorney debt collectors, from taking legal action to collect a consumer obligation in a “judicial district or similar legal entity” other than where the consumer resides or signed the contract14 or, in the case of real estate, where the property is located.15 This section is built upon an approach adopted by the FTC and the courts prior to the FDCPA’s enactment.16

Fair Debt Collection: 16.2.4.4.6 Wrongful garnishment

Knowingly garnishing an account containing only exempt Social Security benefits violates the Iowa Fair Debt Collection Practices Act and the unconscionable debt collection provision of the Iowa Consumer Credit Code.309 Garnishing a servicemember’s bank account without filing the affidavit required by the Servicemembers Civil Relief Act violated the Washington Collection Agency Act.310 A bank’s freezing of a customer’s account to force them to pay their consumer debt to another bank may be a stat

Fair Debt Collection: 1.3.5.2.3 Compensation for collection agencies and individual collectors

The Consumer Financial Protection Bureau’s survey of large credit card issuers found that contingency fees that allow third-party collection agencies to retain a percentage of what they recover were the most common payment structure.279 The average contingency fee was 15.7% in 2020, with a range of 9.5 to 23% with higher fees awarded for accounts that are believed to be more difficult to collect.280 Most issuers also reported paying performance-based incentives.

Fair Debt Collection: 10.4.1 Flat-Rate and Other Collectors Covered

The text of FDCPA § 1692j says:

Furnishing certain deceptive forms. (a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.

Fair Debt Collection: 10.4.2 Extent of Participation in the Collection Process

Federal courts have wrestled with the issue of when a flat-rate relationship with a collector triggers liability for a creditor through FDCPA §§ 1692a(6) or 1692j. In Nielsen v. Dickerson, the court found a collection firm liable under FDCPA § 1692j when it furnished a form letter that gave the consumer the false impression that the firm was meaningfully involved in the case.76 Similarly, in Sokolski v.

Fair Debt Collection: Cal. Fin. Code §§ 100000 through 100025 (West) (Debt Collector Licensing)

Coverage: License required for in-state collector seeking to collect from in- or out-of-state consumers, or for out-of-state collector seeking to collect from California consumers. (Statute allows for use of the Nationwide Multiple Licensing System and Registry). § 100000.1. Exceptions for depository institutions, certain consumer lenders, including pawnbrokers, mortgage lenders, real estate professionals, rent-to-own companies, and trustees carrying out non-judicial foreclosures. § 100000.1. Bonding required. § 100019.

Fair Debt Collection: 16.8.1 State Laws Governing Specific Businesses

State law governing specific businesses may provide relief for abusive debt collection. For example, when a California funeral director transported a widow to a bank instead of the cemetery, and made a loud scene when tellers refused to cash her check, this was not only false imprisonment, but also a breach of the implied covenant to provide a dignified burial service.794 Collection of debts for most types of utility service is governed by specific state laws and regulations.795