If you owe money and debt collectors contact you, consumer protections limit what they can do to collect. Several debt collection practices violate federal and state law.
If the debt collector breaks the law, you can sue them in state or federal court. You may even receive financial compensation for the debt collector's illegal conduct.
FDCPA does have limitations. Debt collectors can still do their job. If not, nobody would lend money, knowing that debtors have protections from any collection efforts. However, the protections under the law only apply to a limited subset of debts. It's crucial to consult with a San Diego consumer protection attorney to understand your rights and options.
Business Debtors Might be More Sophisticated
Business debt falls into a different category. The law presumes that commercial credit is a transaction among two knowledgeable parties who know the risks when entering it. Lenders know that borrowers can default, while borrowers understand that lenders can take whatever action they must to collect, including forcing the borrower into bankruptcy. An entirely different set of rules governs business debts.
FDCPA Only Applies to Consumer Debts
Congress wanted to give debt collectors the ability to do their job while protecting consumers, so it passed the Fair Debt Collection Practices Act to protect consumers from outrageous practices by creditors.
FDCPA distinguishes a business from a consumer, believing that a business is more sophisticated and can protect itself and deal with debt collectors. Congress believed consumers are more inundated and overwhelmed by shady and aggressive debt collectors. In the findings for the bill, Congress specifically mentioned that:
“Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”
These are all areas that affect individuals and their households. Businesses do not have the same problems.
How the FDCPA Defines Consumer in the Law
According to its legal definitions, FDCPA covers consumer debts. The law repeatedly refers to practices the debt collector cannot use when dealing with a consumer, not a business.
For purposes of the law, a consumer is any natural person obligated or allegedly obligated to pay any debt.
The law also expands the consumer definition to include the borrower's spouse, parent (if the borrower is a minor), guardian, executor, or administrator.
Note that the law specifically refers to a consumer as a person. The law does not include a business. A law referring to a corporate entity would specifically refer to a business or corporation, but the FDCPA does not include such references. The only reference to a business in this law is the business involves debt collection businesses, not the debtors.
There is a gray area when the debt collector tries to collect from a sole proprietor. Sole proprietors do not form business entities separate from the individual owner. All sole proprietor debts are also personal debts of the owners.
Creditors might lend to the individual owner as the consumer or the small business. If the debt was incurred in the name of the business, FDCPA will not apply to protect the owner. However, the debt collector must follow FDCPA if the debt is personal.
If you deal with creditors as a small business owner, discuss your rights under FDCPA or other laws with an attorney. They can inform you whether FDCPA applies and whether a creditor violated your rights.
State Debt Collection Laws Also Only Apply to Consumers
The same thing is true for state debt collection laws.
For example, while a California law is more expansive than FDCPA in that it also governs what creditors can do ( not just debt collectors), it still does not cover business debts. The law does not protect small businesses from third-party debt collectors harassing or intimidating them.
While creditors might have concerns about their reputation if they engage in unacceptable collection activities, there are few limits on what they can do to collect debts. Industry codes of ethics are non-binding best practices. The only thing that acts as a constraint on a creditor's behavior when they try to collect a business debt is their business prospects. Many creditors are in the business of lending money or doing deals. If they gain a reputation as aggressive and abusive when it comes time to collect, borrowers will not want to do business with them.
How Debt Collectors End Up in the Position Where They Harass Consumers
From a consumer's standpoint, FDCPA contains several protections prohibiting behavior meant to deceive, intimidate, harass, or annoy. Unfortunately, debt collectors are working with their interests in the case.
They end up in your case in one of two scenarios:
- The creditor enlists them to collect the debt on their behalf (the creditor still retains the debt)
- The debt collector buys the debt from the creditor, often for pennies on the dollar
In the first scenario, the debt collector has an incentive to succeed. They want repeat business from the creditor that will come when they successfully collect the debt.
In the latter scenario, the debt collector will make a large amount of money if they can get the debtor to pay in part or full. Given what debt collectors pay to acquire the debt, they are even profitable if some debtors pay them. Thus, the debt collector tries to pressure everyone in any way that they can to get someone to pay them back. Their goal is to persuade the debtor to pay them without having to take the case to court (although the debt collector can file a lawsuit against an individual debtor because they are the one who owns the debt).
Debt Collectors Use a Variety of Illegal and Abusive Tactics
Debt collectors have been known to use all sorts of questionable and shocking tactics to get debtors to pay them. Their methods can be sophisticated and creative, with the intent of coercing or harassing the debtor into paying.
One of the common methods that debt collectors use is frequent calls. They hope to wear you down and make you tired. If you owe multiple debts, they want to become the one at the front of your consciousness, whom you will pay first with whatever money you have.
However, FDCPA prohibits harassment.
The Consumer Financial Protection Bureau issued new rules that define what it means to annoy a debtor:
- Debt collectors cannot attempt to call you more than seven times in seven days (even if you never answer the phone)
- If the debt collector manages to speak with you about the debt, they cannot speak with you again for another seven days
Debt Collectors Cannot Lie or Deceive You
Another favorite tactic that debt collectors use is trying to deceive you. They may not identify themselves when they call you. Alternatively, they may pretend to be someone else when they contact you. One common method is for the debt collector to pretend that they are either a lawyer or affiliated with a lawyer to convince you that you will be in trouble if you fail to pay them. If a lawyer acts as a debt collector, FDCPA governs them.
FDCPA also prohibits deception in debt collection calls. The debt collector must identify themselves at the beginning of the call and give you the correct information about whom they represent.
Debt Collectors Cannot Engage in Abusive Tactics
Debt collectors also like to intimidate you or shame you. They want you to feel scared and guilty. They will do whatever it takes to persuade you to pay and make these communications stop. They may try to frighten you directly through verbal abuse. They may even try to contact your employer or friends to shame you in their eyes.
Again, the conduct falls under the "whatever it takes" category to collect from you so that they can repeat the process with the next debtor.
You Can Stop Debt Collectors from Contacting You
You can put a stop to this conduct and take strong legal action. First, you are in control when it comes to debt collector communications. You can make all contact stops if you choose. If you do not want the debt collector to call you at certain times or even call you at all, you just have to tell them that. Preferably, put it in writing so you have proof.
The debt collector will need to respect your wishes. If they try to call you after that, they will break the law. To be clear, they can continue their efforts to collect from you, which will mean suing you in court if you do not pay.
You Can Fight Back When Debt Collectors Have Broken the Law
FDCPA is your consumer protection statute as a debtor. Like many consumer protection laws, it gives you the right to enforce it through a private right of action. Instead of waiting for the government to take action against the debt collector (and they will under certain circumstances), you can take matters into your own hands and file a lawsuit against them. You have the same right to sue under state law.
The law entitles you to financial compensation when you prove that the debt collector broke the law. It does not matter whether the debt collector knew about the law or intended to violate it. They will be strictly liable for their conduct. There are very few defenses that a debt collector can successfully use once you can prove that they broke the law.
Your Damages in a Successful FDCPA Lawsuit
If your FDCPA lawsuit is successful, you can receive damages from the debt collector. First, they must pay you a statutory penalty of $1,000 for your case. Then, you can also recover the damages you suffered personally from their conduct.
These damages can include:
- Emotional distress damages from the harm that the debt collector caused you
- Medical expenses if you needed treatment for the damage caused by the debt collector
- Lost income if you lost your job or your productivity at work was affected
- Embarrassment and humiliation caused by the debt collector
While FDCPA preempts state law, you can file a case in state court if the law is more extensive than FDCPA. The benefit to filing in state court is that you may even qualify for punitive damages for a debt collector's extreme and egregious conduct. Although FDCPA does not address punitive damages, most federal courts believe you cannot get them in a federal lawsuit.
You may also file or join a class action lawsuit when the debt collector used similar tactics against numerous debtors.
Call an Attorney if a Debt Collector Has Violated Your Rights
Always contact an attorney if you believe a debt collector broke the law. You may not know how to deal with the debt collector or what conduct is prohibited. An attorney can advise you of your legal rights and tell you whether you have a lawsuit against the debt collector. Not only can you stop the wrongful compensation, but you may also recover compensation for what already happened.
A consumer protection attorney will not charge you money upfront to take your case. They will also not charge you if your case does not succeed. The attorney will receive legal fees if you win your case, but the debt collector may cover those costs, as they are often part of your award.
You can and should do whatever is in your power to stop illegal debt collection practices. The combination of a consumer protection attorney in San Diego and the FDCPA gives you that ability.