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Tuesday, April 23, 2013

Fair Debt Collection Practices Act (FDCPA)

Margaret Mikyung Lee
Legislative Attorney

The recent fiscal crisis and recession have accentuated debt collection issues, prompted federal regulatory and enforcement activities regarding the debt collection industry, and motivated assessments of the effectiveness of the Fair Debt Collection Practices Act (FDCPA). The Consumer Financial Protection Bureau (Bureau or CFPB) and the Federal Trade Commission (FTC), the two main agencies charged with regulating and/or enforcing the FDCPA, have identified debt buying, the use of litigation as a collection strategy, and the impact of current technology on the debt collection industry as three major developments that did not exist when the FDCPA was enacted in 1977. They have conducted analyses of consumer complaints about FDCPA violations and studies and workshops to evaluate the debt-buying industry and the impact of technological developments such as social media, email, mobile phones, etc., on how debt collectors communicate with consumers and find information about consumer debts. At present, about 30 million Americans, nearly 10% of the population, are subject to debt collection for amounts averaging $1,500 per person, according to the CFPB.

The FDCPA was enacted as an amendment to the Consumer Credit Protection Act. Its purpose is to “eliminate abusive debt collection practices by debt collectors.” Debt collectors are prohibited from threatening or harassing debtors, and their contacts with debtors are restricted. The FDCPA commonly only applies to third-party debt collectors. A “debt collector” is generally defined as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” The FDCPA does not apply to creditors who are collecting their own debts, unless in the process of collecting debts, the creditor uses a name other than his own which would indicate that a third person is attempting to collect the debt on his behalf. There are certain other exceptions, such as federal or state government employees collecting debts as part of their official duties.

As of the date of this report, only one bill to revise the FDCPA has been introduced in the 113
th Congress. This bill would define child support as a debt. Several bills were introduced in the 112th Congress to address various consumer problems with the debt collection industry, including attempted collection of time-barred debts, arrests of debtors, inadequate information about a debt and/or inadequate verification of a debt, and threatening to withhold treatment to induce payment of delinquent medical debt. On the other hand, legislation in the 112th would also have restricted the liability of good-faith debt collectors for conduct that complies or conforms with regulations or interpretations of the CFPB.

Date of Report: April 11, 2013
Number of Pages: 17
Order Number: R43041
Price: $29.95

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