Summary of the Fair Debt Collection Practices Act
It is important that creditors understand the Fair Debt Collection Practices Act, as it can impact collection strategies.
The banking and credit system is dependent on the collection of valid debts. Unfair or deceptive practices undermine the public confidence which is essential to the continued functioning of the banking and credit system and sound extensions of credit to customers. The legislature has determined that there is need to ensure that debt collectors and debtors exercise their responsibilities to one another with fairness, honesty and due regard for the rights of others. In order to prohibit debt collectors from engaging in deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts, California has enacted the California Fair Debt Collection Practices Act, also sometimes referred to as the Rosenthal Fair Debt Collection Practices Act (“RFDCPA”). This Act, along with the federal Fair Debt Collection Practices Act (“FDCPA”) provide guidelines for what is allowed. These Acts do not cover business debts. They apply to “consumer” debts, such as credit cards, car loans, medical bills and mortgages. It is important to note that the RFSCPA does not apply to attorneys, however the FDCPA does apply to attorneys. Therefore, any suit against a collection attorney must be filed under the federal Act. Another key difference is the federal Act generally does not apply to the original creditor, but only to the company attempting to collect on behalf of the original creditor, while the Rosenthal Act applies extends its protections to the original creditor.
So, the question is: What actions are prohibited by the RFDCPA and the FDCPA?
In short, debt collectors cannot harass debtors. This includes using obscene or profane language, abuse, or making false statements. The collector must represent themselves truthfully and must state that their purpose for contacting the debtor is to collect a debt. A debt collector may not threat that the failure to pay a debt will result in an accusation that the debtor has committed a crime, where such an accusation, if made, would be false. A debt collector may not threat that nonpayment may result in arrest, garnishment, attachment or sale of any property or the garnishment or attachment of wages of the debtor, unless such action is in fact contemplated by the debt collector and permitted by law.
There are also restrictions as to when collection calls may be made. Phone calls to the debtor are only permitted to call between the hours of 8AM and 9PM. The debtor may ask to not be called at a specific time if that time is inconvenient and the collector must abide by the debtor’s request. There is no law that limits the number of phone calls a collector can make, but repeated calls over a short period of time, may constitute harassment. A collector may contact a debtor at work, unless the collector knows such correspondence is prohibited at the debtor’s place of work or if the debtor has communicated that they do not desire to be contacted at work. A collector is also restricted from communicating information regarding consumer debt to any member of the debtor’s family other than the debtor’s spouse or the parents or guardians of the debtor who is either a minor or who resides in the same household with such parent or guardian, prior to obtaining a judgment against the debtor, except where the purpose of the communication is to locate the debtor, or where the debtor or his attorney has consented in writing to such communication.
Within five days of first contact with the debtor, the creditor must provide the following information to the debtor:
1) Amount owed
2) Name of creditor
3) Process to follow if bill is disputed
If first contact is via mail, the creditor must include:
1) Creditor’s name
2) Name, phone number, and address of the collection’s agency
3) Date notice was mailed
4) Amount due
5) Employer contact
6) Statement that says the debt is assumed valid unless the consumer notifies the collector within 30 days of receipt of notice that the debt is disputed.
A debt collector also cannot give false credit information about a debtor to anyone, including the credit reporting agencies, send a debtor anything that looks like an official court document, if is not an official court document, or use a false company name.
If the debtor requests that contact cease in writing, the collector must refrain from contacting the debtor. After receipt of the letter, the collector may call the debtor one final time to explain what actions are to be taken.
If the debtor claims the subject bill was paid, the debtor must send the creditor a letter with proof of payment. All attempts to collect must stop until the collector sends written verification that the debt is still owed.
A debt collector that violates the RFDCPA is liable for actual damages. In addition, if the violation is made willfully and knowingly, a penalty could be enforced in an amount between $100 and $1000. In an action brought for a violation, attorney’s fees are awarded to the prevailing party. There will be no civil liability if within 15 days either after discovering a violation which is able to be cured, or after the receipt of a written notice of such violation, the debt collector notifies the debtor of the violation, and makes whatever adjustments or corrections are necessary to cure the violation with respect to the debtor.