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Fair Debt Collection: 16.2.5.2.1 Actual damages

When a private cause of action is available, it universally allows the consumer to recover actual damages.343 Damages may be awarded for the reasonably foreseeable harm caused by the violation regardless of whether the defendant intended to cause injury.344 Actual damages may include payments the debtor made in response to harassment or a false threat345 and expenses incurred in defending against an unfounded collection action.

Fair Debt Collection: 16.2.5.2.2 Statutory damages

Some state debt collection statutes provide for statutory damages.352 Under some of these statutes, actual damages are not a prerequisite to recovering such statutory damages.353 Other state debt collection statutes, however, require a showing of actual injury or damages as a precondition of any action, whether for statutory damages or otherwise.354

Fair Debt Collection: 16.2.5.2.3 Punitive damages

Some debt collection statutes authorize punitive damages.362 These statutes may be interpreted to require the elements necessary to establish punitive damages under the common law.363 When debt collection statutes are silent about the availability of punitive damages, some courts look to common law to determine whether punitive damages are available.364

Fair Debt Collection: 16.2.5.2.4 Attorney fees

Some collection statutes provide for an award of the consumer’s attorney fees in order to make assertion of claims under the statute economically feasible.367 However, some of these statutes, unlike the FDCPA, provide for fee awards to the prevailing party, which could be either the consumer or the debt collector.368

Fair Debt Collection: 16.2.5.2.5 Other relief under state debt collection statutes

Injunctive and declaratory relief may be available under state debt collection statutes.369 Washington’s Collection Agency Act provides that a licensee that commits one of the practices prohibited by the statute is forever barred from recovering any interest, fees, or other charges on the claim, but is limited to the amount of the original claim.370 Class actions are typically allowed.371 Courts may impose individual liability on collection agency

Fair Debt Collection: 16.2.5.3 Defenses

Collectors may attempt to have a state debt collection practices claim dismissed by claiming that a judgment on the underlying debt is res judicata or that the debtor gave up their rights in a settlement agreement with the collector.

Fair Debt Collection: 16.3.3.1 Generally

The typical UDAP statute has a broad initial scope section, covering “trade or commerce” or “consumer transactions,” but then goes on to exempt certain sellers or types of transactions. Many UDAP statutes do not mention debt collection specifically, so courts must construe these general terms to determine whether debt collection is covered.

Fair Debt Collection: 16.3.3.2 Debt Collection Is in Trade or Commerce

UDAP statutes that cover “trade or commerce” are generally construed to cover debt collection.416 Pennsylvania417 and Montana418 courts have held that debt collection activities are “in trade or commerce” even where this term is defined as the advertising, sale, offering for sale, or distribution of services, property, or other things of value.

Fair Debt Collection: 16.3.3.3 Coverage Under Statutes Requiring a “Consumer Transaction” or Acts in Connection with the Sale of Merchandise

A number of UDAP statutes apply only to “consumer transactions”—typically defined as those for personal, family, or household use.422 Many courts recognize that, as long as the underlying transaction is a “consumer transaction,” the UDAP statute applies to all phases of the transaction, including collection.423 Likewise, debt collection is in connection with the sale of merchandise where the underlying transaction arose from such a sale.424 The Mis

Fair Debt Collection: 16.3.3.5 What Consumers Are Protected?

A UDAP statute may protect out-of-state residents,454 although some UDAP statutes are limited to acts that occur in the state.455 Some courts have applied their UDAP statutes to actions that occur outside the state, but that affect state residents.456 Some state UDAP statutes protect businesses as well as consumers, but others protect only consumers.457

Fair Debt Collection: 16.3.7 CFPB Examples of Unfair, Deceptive, or Abusive Debt Collection Practices; Rulemaking

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act663 gives the Consumer Financial Protection Bureau (CFPB) the authority to write rules to prevent unfair, deceptive, and abusive practices in connection with consumer financial services and products.664 While consumers do not have a private right of action to enforce any rules the CFPB issues under this general rulemaking authority,665 courts are likely to give the CFPB’s rules and i

Fair Debt Collection: 16.4.1 Overview

Most states have passed statutes to deal with abuses by credit repair organizations.692 These statutes, often termed the state Credit Services Organization Act, offer strong remedies and have the potential of applying to certain debt collection activities. They typically follow the federal Credit Repair Organizations Act693 closely in some respects, but differ in significant ways, often imposing additional requirements such as registration and bonding.

Fair Debt Collection: 16.4.2 Scope

Like the federal Credit Repair Organizations Act, all or nearly all state credit repair statutes apply to organizations that offer to improve an individual’s credit rating in return for the payment of money or other valuable consideration. This language should be interpreted consistently with the federal statute to encompass debt collectors who represent to debtors that payment will improve their credit records.694

Fair Debt Collection: 16.4.3 Substantive Prohibitions

Debt collectors that fall under state credit repair statutes are likely to have made no attempt to comply with the statute’s substantive requirements. Typical requirements of state credit repair statutes include:

Fair Debt Collection: 16.4.4 Private Remedies

Almost all state credit repair statutes provide a private right of action to consumers. Some do so both by making a violation actionable under the state UDAP statute and by creating a special cause of action.

Fair Debt Collection: 16.5.2 Unauthorized Practice of Law by Collection Agencies

States have taken very different positions as to what activities of a collection agency constitute unauthorized practice of law.702 Alabama considers demands for payment that do not threaten suit not to constitute the practice of law.703 Rhode Island prohibited any debt collection activities by third parties unless they were admitted to practice in the state, but this restriction was found to be an unconstitutional burden on interstate commerce.704