Keeping The Hounds at Bay: Protecting Consumers From Debt Collectors

Nick Beermann

A common question fielded by volunteer attorneys at the King County Bar Association’s Neighborhood Legal Clinics is what rights indebted consumers have with respect to the creditors or collection agencies that seek to collect from them. The fact that consumers face action against them by creditors is little surprise. Ac-cording to the Federal Trade Commission, if you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a “debtor,” who may be subject to action against you by your creditors or other debt collectors. While bankruptcy may be an option for some, many consumers simply want to be left alone.

Unfortunately, debtors may never completely rid themselves of contact by creditors and collection agencies. But certain practices of creditors and collection agencies reported by consumer debtors are indeed illegal and give rise to certain legal rights of which a large number of consumers are unaware.

The Fair Debt Collection Practices Act

The main law governing how creditors contact and deal with consumer debtors is the Fair Debt Collection Practices Act, 15 U.S.C. ¤ 1601 (“FDCPA”). Congress enacted the FDCPA in reaction to what it determined was the inadequacy of then-existing laws redressing the “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” See 5 U.S.C. ¤ 1692.

The FDCPA prohibits debt collectors from engaging in any conduct that results in harassment, oppression or abuse of any person in connection with debt collection. This includes using or threatening to use violence; the use of obscene or profane language; the publication of a list of consumers who allegedly refuse to pay debts (except to consumer reporting agencies); causing a telephone to ring repeatedly or continuously with intent to annoy, abuse or harass any person at the called number; and calling a debtor without disclosing the identity of the collector. The FDCPA further prevents debt collectors from using any false, deceptive or misleading representations. For example, a popular misconception among some consumers is that nonpayment of a debt will result in their arrest or imprisonment. See 15 U.S.C. ¤ 1692d; 1692e.

Protection specific to consumers under the FDCPA first falls under Section 805, which provides that debt collectors may not communicate with consumers in connection with a debt collection (1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer, or outside of the hours of 8:00 a.m. to 9:00 p.m.; (2) if the debt collector knows the consumer is represented by an attorney; or (3) at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication. See 15 U.S.C. ¤ 1692c. For purposes of the FDCPA, consumer includes a debtor, the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator. Id.

If consumers notify a debt collector in writing that they refuse to pay a debt or that they wish a debt collector to stop communicating with them, the FDCPA requires the debt collector to cease further communication except to (1) advise that communication shall cease; (2) to notify that the debt collector will be seeking legal remedies such as a lawsuit; (3) or to notify that the debt collector or creditor intends to invoke a specified remedy (such as a contract acceleration clause). But while any consumer may request to no longer be contacted by a creditor, the creditor is still free to pursue other avenues such as lawsuit and/or garnishment to collect on the underlying debt.

Creditors are required to notify consumers of the collection of any debt in writing and provide consumers the opportunity to dispute it. Consumers who wish to dispute a debt must do so within 30 days after notification. A debt collector or creditor must then verify the debt and send that verification to the consumer. During this time period, creditors cannot actively collect or attempt to collect the consumer’s debt. A failure to dispute a debt does not constitute any admission of liability (though it will likely lead to future legal action against the consumer debtor). See 15 U.S.C. 1692g.

Invoking the FDCPA and exercising the right to have creditors stop contacting a consumer may not stop the creditors from contacting consumers, but those continued violations give rise to a claim for damages against the creditor or debt collector. Damages are equal to the sum of (1) any actual damage sustained by the consumer as a result of the creditor’s failure to comply; (2) individual damages determined by the court not exceeding $1,000 and attorneys fees. There is a one year statute of limitation for actions brought in Federal District Court. See 15 U.S.C. ¤ 1692k.

The FDCPA does not override a creditor or collection agency’s duty to comply with state law, except where the state law is inconsistent, and then only to the extent of the inconsistency. State laws are not considered inconsistent with the FDCPA to the extent they afford consumers greater protection.

State Laws Governing Collection Agencies

In addition the FDCPA, Washington consumers have certain protections from creditors under RCW 19.16, which governs collection agencies. Similar to the FDCPA, RCW 19.16.250 prohibits collection agencies from, among other things:

• publishing “bad debt lists”;
• representing itself as having an official connection with any governmental agency or law enforcement agency;
• performing any acts constituting the practice of law;
• threatening debtors with impairment of their credit ratings if a claim is not paid;
• communicating with debtors through the use of forms that simulate the form or appearance of judicial process or government documents;
• threatening to take any action against debtors that the agency cannot legally take at the time of the threat; or
• informing debtors that their debt has been increased by the addition of attorney fees, investigation fees, service fees or any other fees other than allowable interest, collection costs or handling fees permitted by statute. See generally RCW 19.16. 250.

RCW 19.16.250 further prohibits a collection agency’s communication “with a debtor or anyone else in such a manner as to harass, intimidate, threaten or embarrass a debtor.” It is presumptively harassing under the statute if a communication is made with a debtor or spouse more than three times in a single week (in any form); made to the debtor at his or her place of employment more than one time a week; or made with the debtor or spouse at his or her residence between the hours of 9:00 p.m. and 7:30 a.m. See RCW 19.16.250(12).

Because of the conflict between the FDCPA between the times creditors may call a debtor, the FDCPA controls. Thus, creditors cannot call a debtor between the hours of 9:00 p.m. and 8:00 a.m.

Remedies for Debt Collection Violations

Violations of the FDCPA give rise to claims for damages. Violations of RCW 19.16.250, however, are per se unfair and deceptive trade practices under Washington’s Consumer Protection Act, RCW 19.86. Moreover, a collection agency that violates RCW 19.16.250 will be barred from collecting interest, service charges, attorneys’ fees, collection costs or any other fees associated with the collection of the underlying debt. See RCW 19.16.440 and .450.

As is clear under the FDCPA and RCW 19.16.250, consumers are not without rights when it comes to debt collectors. Additional rights include those under the Fair Credit Reporting Act, which relates to the treatment of consumer credit reports and disclosure of consumer information. See 15 U.S.C. ¤ 1681. Consumers may never rid themselves of contact by creditors, but because many consumer clients do not understand their rights, attorneys’ familiarity with each of these laws is useful.