Consumer Protection & Antitrust Bureau Sourcebook – Credit: Debt Collection
Debt collection practices, whether by creditors, collection agencies, or attorneys, are a frequent and often emotionally charged source of consumer complaints.
Debt collection practices, whether by creditors, collection agencies, or attorneys, are a frequent and often emotionally charged source of consumer complaints. Many people finding themselves subject to debt collection may already be experiencing a broad range of financial and personal difficulties. Debt collection is an added indignity. Although debtors are bound to honor their contracts (with a few exceptions for bankruptcies), they should not find themselves subject to harassing and deceptive collection practices.
Overzealous and occasionally unscrupulous debt collectors have given the field of debt collection a history of abusive practices. Some of the more common abuses include:
- Repeated phone calls late at night or early in the morning
- Abusive or threatening language
- Contacting friends, neighbors or employers about a debt
- Using deception to obtain information about a consumer (such as pretending to do a telephone survey)
- Using deception to force payment, for example, by pretending to be a lawyer, claiming to have initiated a lawsuit, or using stationary designed to look like official court or government communication
In response to such abuses, both New Hampshire and federal statutes regulate and control the time, manner, and substance of collection procedures, and provide consumers with remedies against abusive collection activities.
Debt collection practices are governed by two laws: New Hampshire's Unfair, Deceptive or Unreasonable Collection Practices Act (RSA 358-C) (State Act) and the federal Fair Debt Collection Practices Act (15 U.S.C. § 1692-1695) (FDCPA). In addition, the Federal Trade Commission (FTC) has guidelines for the collection industry describing specific acts and practices the FTC considers to be in violation of the FDCPA.
Type of Debts Covered
Both the State Act and FDCPA cover debt collection activities against consumers arising out of "consumer debts" incurred primarily for personal, family or household purposes. This covers nearly the whole range of personal transactions for which a consumer may incur debt, including retail financing, credit card purchases, auto loans, and first and second mortgages. No minimum or maximum dollar amount triggers or cancels the protections available under either statute.
The State Act and the FDCPA provide nearly parallel protections for consumers. Debt collectors who are operating in New Hampshire must comply with the requirements of both the State Act and FDCPA. The redresses offered to consumer debtors who find themselves harassed by unscrupulous debt collects are somewhat different.
Types of Debt Collectors Covered
The most important difference between the two laws is that the State Act applies to creditors collecting debts owed to them in their regular course of business, while FDCPA generally does not.
Under the State Act, a debt collector is: any person who by direct or indirect action, conduct or practice enforces or attempts to enforce a debt owed … as a result of a consumer credit transaction. This definition applies equally to:
- Creditors attempting to collect on debts owed directly to them
- Collection agencies attempting to collect on behalf of creditors for a fee or commission
- Factors (companies purchasing or accepting an assignment of delinquent accounts receivable from creditors, usually at a discount, and then initiating collection actions against consumers on their own behalf)
- Repossession companies specializing in seizing property owned by consumers but subject to security interests ("repo companies" typically specialize in seizing financed cars from consumers who default on car loans).
Example: Dr. Helper's office manager, Toni True, is in charge of collecting on past due accounts. Toni tries to be as understanding as possible but the doctor has bills to pay too. When Dr. Helper gets complaints about the overly zealous measures Toni uses to collect debts owed by patients, she discovers that Toni's actions are covered by the State Act, although not by FDCPA.
The FDCPA applies to collection agencies, factors, and repossession companies but excludes most creditors attempting to collect debts owed to them in the regular course of their own businesses. However, this exclusion does not apply to creditors who suggest that their collection efforts are being performed by a third party.
FDCPA covers some "debt collectors" who may be beyond the scope of the State Act. For example, FDCPA explicitly applies to attorneys who act as debt collectors. Whether the State Act applies to attorneys remains an unresolved
Example: The Jollytime Company uses its own in-house attorney, Sage Law, to collect debts and therefore is not ordinarily subject to FDCPA. However, if Ms. Law does not identify herself to a debtor as an employee of the Jollytime Company, the debtor might be led to think that Jollytime had already "turned the matter over" to independent lawyers. In this case, FDCPA would apply to Jollytime and Ms. Law.
How Debtors Are Protected
Both the State Act and FDCPA prohibit debt collectors from engaging in certain practices, and give debtors some protection during the debt collection process. In general, both statutes:
- Require debt collectors to clearly identify themselves and the nature of any debt at issue in their communication with consumers
- Prohibit a broad range of actions by debt collectors
- Establish a consumer's rights to limit the type, frequency and location of a debt collector's contacts with the consumer
- Establish consumer remedies, including statutory damages, if debt collectors violate the requirements and prohibitions of either Act
What Debt Collectors Must Do
The debt collector must disclose in any written or telephone communication to the consumer:
- Its identity and business address
- The name of the person making the telephone call
- The identity of the person or company for whom the debt collector is attempting to collect the debt.
In addition, under FDCPA, debt collectors must follow up an initial phone contact with a written communication within 5 days containing the following information:
- The amount of the debt
- The identity of the person or company for whom the debt collector is attempting to collect the claimed debt
- A statement that the consumer may make a written request within 30 days that the debt collector identify the original creditor, if different from the current creditor (this provision is intended to identify the original source of the debt if it has been sold or assigned to a collection agency)
- A statement that the consumer may notify the debt collector in writing within 30 days that he or she is disputing the debt, and that the debt collector must furnish the consumer with documents verifying the disputed debt or a copy of any judgment against the consumer
- A statement that if the consumer does not notify the debt collector within 30 days that she or he disputes any or all the claimed debt, the debt collector will assume that the debt is valid.
What Debt Collectors Cannot Do
A wide range of collection activities is specifically prohibited. Generally these prohibited activities fall into two categories: actions designed to intimidate, harass or annoy consumer debtors; and actions that are unfair, misleading or deceptive.
- The use of obscene or abusive language and threats of violence is prohibited. The FDCPA also forbids any threat of criminal action or harm to the consumer's person, property, or reputation. Debt collectors have even been held liable for the use of ethnic slurs, curse words, insults such as "liar," "deadbeat" and "crook," and for threatening to "ruin" credit ratings.
- Debt collectors are prohibited from contacting consumer-debtors at unusual times, or times known to be inconvenient to the consumer. The FDCPA actually goes as far as specifying that calls placed before 8:00 a.m. and after 9:00 p.m. (in the consumer's time zone) are generally improper. If a debt collector knows, or has reason to believe, that odd hours are not inconvenient for the consumer (such as if the consumer works at night), then the consumer may be contacted at other times.
- Debt collectors may not telephone the consumer-debtor repeatedly or engage the consumer-debtor in endless telephone conversation.
- Both the State Act and FDCPA state that debt collectors may not contact consumer-debtors at their places of employment under certain circumstances:
- Under the State Act, a debt collector may not call a consumer-debtor at his or her place of employment if the debtor informs the debt collector that he or she does not wish to be contacted there.
- Under the State Act, even if the debt collector is not told to refrain from calling at a place of employment, the debt collect may, at most, place one telephone call per month to the debtor's place of employment.
- In making a call to a place of employment, the debt collector may not inform the employer of the reason for the call unless asked by the employer.
- Under the FDCPA, a debt collector may not call the consumer-debtor at work if it is known that the employer prohibits the employee from receiving such communications. In effect, this provision allows a consumer-debtor to inform a debt collector that his or her employer forbids incoming personal calls and requires the debt collector to respect such a notice.
Note: One narrow exception to this prohibition exists. A debt collector who has been unable to locate a consumer-debtor may send one letter to the consumer-debtor's last known place of employment.
- A debt collector may not communicate with anyone other than the consumer-debtor, his or her spouse or the parents or guardians of a debtor who is a minor, about the debt unless the debtor expressly agrees to permit the "third party" contacts. The State Act further limits contacts with spouses, parents, and guardians to one instance for the sole purpose of locating the debtor when the debt collector has been unable to locate the debtor for at least 30 days.
- A debt collector is prohibited from continuing to write or call a consumer-debtor once informed that the consumer is represented by an attorney or other representative (such as a credit counselor).
- Debt collectors are prohibited from publishing the names of debtors in any medium (such as a newspaper or magazine). They may not advertise the sale of debts (to so-called "factors") in order to embarrass or humiliate debtors through public exposure.
A number of misleading or deceptive tactics by debt collectors are expressly prohibited. Debt collector may not mislead debtors about who they are, may not mislead debtors about the debts, may not mislead about what actions they will be taking, or make any false representations in order to obtain information.
- Debt collectors may not misrepresent who they are or misrepresent documents by:
- Using false names
- Pretending to be an attorney, state, local or federal official, law enforcement or court officer
- Using forms or documents designed to look like "official" court or government documents if they are not
- Pretending to be or affiliated with a credit reporting agency
- Falsely implying that documents are not legal process forms or do not require any action or response by the consumer when they do
- Suggesting that a debt has been turned over to an "innocent third party" when in fact the debt has been transferred to a collection agency
- Debt collectors may not make misrepresentation about the debt by:
- Misrepresenting the size or status of the claimed debt, or falsely characterizing the status of any legal proceedings involving the debtor
- Stating or implying that attorney's fees or costs will be added to the debt unless such charges are specifically allowed by contract, agreement, or court order (most consumer credit agreements, such as credit card contracts, contain a provision obligating the consumer to pay collection costs and fees)
- Implying that a transfer or sale of the debt will cause the consumer-debtor to lose the ability to defend him- or her-self about the non-payment of the debt, or will be subject to some unlawful debt collection practice
- Communicating, or threatening to communicate, false credit information to another person or creditor, including failing to communicate that a particular debt is disputed.
- Debt collectors may not mislead about what action they might take by:
- Making unfounded threats of criminal charges against the debtor
- Falsely implying that the debtor will be arrested or imprisoned, or that his or her wages will be garnished or property attached unless those actions are legal and the debt collector intends to take that action (the debt collector must disclose that a court order is required for any of these actions)
- Threatening to take any action which the debt collector either does not have the legal right to take, or does not ordinarily take (such as unfounded threats of litigation)
- Stating or implying that failure to pay a debt will result in the debt being turned over to collection agency who would use harsh, vindictive, or abusive tactics.
- Debt collectors may not use false representations to collect a debt or to get information by:
- Using false pretenses to either induce the debtor to contact the debt collector or make payment, or to obtain information about the consumer from third parties
- Threatening the consumer with arrest or seizure of property or wages, without disclosing that court orders may be required for any such action.
In addition, FDCPA specifically lists a number of tactics regarding the collection of money from consumers by debt collectors which it declares unfair. Debt collectors may not:
- Threaten repossession or seizure of the consumer's property, unless the debt collector has the right to do so
- Cause the consumer any expense through deceptive tactics (for example, toll calls, collect calls, or telegram fees incurred by the consumer in responding to a bogus "prize offer")
- Collect an amount greater than the debt, for such things as attorney's fees or costs, or other incidental expenses, unless these kinds of charges are expressly allowed in the credit agreement or by law
- Accept checks from a debtor which is postdated by more than 5 days unless the debt collector subsequently notifies the debtor that the check is about to be deposited (this notice must be provided not more than 10 and not less than 3 days before the debt collector deposits or cashes the postdated check)
- Deposit or cash a postdated check before the date listed on its face
- Solicit postdated checks for the purpose of initiating or threatening criminal actions
- Contact the debtor by post card, or by include information or symbols on an envelope which identifies the writer as a debt collector
Example: Sue receives a notice from a debt collection agency that her magazine subscription is still unpaid. She finds the canceled check that she wrote to pay for the subscription several months ago. Sue writes a letter to the debt collection agency stating that she has paid for her subscription, attaching a photocopy of both sides of her canceled check.
Consumer-debtors are given several legal rights upon being contacted by a debt collector.
The debtor has the right to dispute the existence or validity of the amount of the debt. The debtor must be informed of this right by the debt collector. The debtor who wishes to dispute all or any portion of the alleged debt must notify the debt collector that all or part of a claimed debt is disputed. The notice about the disputed debt must be:
- In writing
- Postmarked or delivered in-hand within 30 days of receiving the follow-up notice from the debt collector
A disputed debt could be:
- A debt that you believe that you do not owe, or that you believe that you do not owe the amount stated
- A debt that you have already paid
- A debt related to being hospitalized. If you informed the hospital that you could not pay for the care, the hospital should have considered payment under a charitable care policy
- A debt the collection of which you believe is barred because too much time has passed
- A debt that was previously discharged in bankruptcy.
Bankruptcy is a remedy open to those with overwhelming debt. Congress revised the federal bankruptcy law, and the new rules went into effect in October 2005. Debtors may no longer have a choice of whether they file a Chapter 7 (straight) or Chapter 13 (wage earner repayment plan) bankruptcy. The new rules will bar some people from filing under Chapter 7 and push them into filing a Chapter 13 repayment plan. Furthermore, counseling is now required of all those who file for bankruptcy.
What counts as allowable living expenses when calculating how much income is available for debt repayment has been modified. Only allowable expenses are included as living expenses. More assets may be liquidated (sold) to help with debt repayment.
When, exactly, a lawsuit can be brought regarding a debt depends entirely upon the type of claim and/or the basis of the debt. For example, a credit card company has three years to sue on a debt, while a debt already reduced to judgment in a court may be subject to a collection lawsuit for up to 20 years. Most debt claims, however, that arise from a written credit contract must be brought within 3 years of the payment default. There are exceptions to this rule, for example, a retail sales installment contract claim may be brought within 4 years of the default of payment. Also, a person can sue to collect on a judgment from a court for a longer period of time.
Example: Anthony receives a telephone call from a debt collection agency stating that he owes money on a credit card that he got rid of 7 years ago. Anthony does not make a promise to pay something each month. In stead he asks the agency to send information about the debt. After he gets a notice from the agency, he writes a letter stating that he believes the debt to no longer be valid because it is too old.
Note: If you receive a call from a debt collector or a creditor about an old debt, you should be careful to avoid making a new promise to pay. Instead, you should review the debt, perhaps with an attorney, to make sure it is still valid. If you do make a promise to pay an old debt that was time-barred, you effectively "reaffirm" that debt so that it can be collected as if it were a new debt.
What the Debt Collector Must Do
After receiving the notice of dispute from the consumer-debtor, the debt collector must:
- Suspend collection activities regarding the claimed debt until the collector verifies the debt or gets a copy of the judgment against the debtor
- Provide the verification requested by the consumer (such as a copy of the bill)
If more than one debt is being collected by the debt collector, the consumer-debtor needs to instruct the debt collector on how to apply any payments made to those other debts. The debt collector may not apply a payment to a disputed debt.
Limiting Debt Collector Contact
The consumer-debtor has the right to limit further contacts by the debt collector. Under the FDCPA, you can stop a debt collector from contacting you by writing a letter to the debt collector asking that contact stop. The letter should include a statement such as: "I am exercising my right under federal law and I want you to stop contacting me." This letter should be sent to the debt collector by certified mail with a return receipt requested. Keep a copy of the letter for your files. Understand, however, that this type of letter does not make the debt go away if you really do owe it. You can still be sued for the debt.
Once the debt collector receives the letter, the collector should have no more contact with you, with the following two exceptions:
- A single notice both to advise you that the collection efforts are being terminated and inform you of any actions which may (or will) be taken as a result of nonpayment (such as a lawsuit or possible repossession of disputed goods)
- Any communications incidental to seeking legal remedies for nonpayment (such as service of process in a court case or leaving a notice regarding repossession of disputed goods at the consumer's residence)
Contact with the debt collector will also stop if you are represented by an attorney, and the debt collector is notified of your legal representation. Thereafter, all communications must be directed to the attorney, unless the attorney fails to answer the related correspondence or return phone calls within 10 days. Under the State Act, you may also be represented by a financial counseling organization or any other similar person, in addition to an attorney. The debt collector then must similarly only contact the designated representative when notified to do so.
What a Debtor Can Do if a Debt Collector Violates the Law
Both the State Act and FDCPA permit consumers to sue debt collectors who engage in improper collection practices. Both Acts provide for injunctive relief in the form of court orders forbidding a debt collector to continue any improper practice. In addition, each Act provides actual and statutory damages for individual consumers, as well as costs and attorney's fees. The State Act permits for the greater of actual damages or $200, while the FDCPA provides for actual damages plus statutory damages of up to $1,000.
Under the State Act, the debtor may raise a counterclaim in any suit brought by a creditor or debt collector, relative to the debt collector or creditor violating the State Act. Upon proof of a violation by the debt collector or creditor, the court will award damages to the debtor-consumer, and will reduce the debt owed by the amount of the damages.
Consumers may seek remedies through a court action in either superior or small claims court for violation of the State Act, or in federal court for violation of the FDCPA. The statute of limitations (the time during which an action may be brought in court) under these statutes is different: no more than 3 years after the violation in state court and 1 year in federal court.
Points To Remember
- If you are contacted by a collection agency or debt collector, you have to receive a written notice giving you information about the alleged debt. You have the right to know the amount owed, the name of the creditor, and what action you may take if you believe you do not owe the debt.
- Remember, a debt collector cannot harass you to repay the debt in any way.
- The debt collector may not contact you at unreasonable times, or at work if your employer disapproves.
- A debt collector may not contact your friends or relatives.
- Remember, that while you may find it upsetting to have a debt collector contact you, if the debt is valid, reasonable collection methods are not in violation of the law.
If you are being contacted by a debt collector, keep a record of the dates, times, description of what was said or done, and the name of the person making the contact.
Whenever you need to communicate with a debt collector by mail, send the letter by certified mail, return receipt requested, and keep a copy of the letter for your files.
Where To Go If You Have A Problem
Contact the NH Consumer Protection & Antitrust Bureau if you have a problem with a debt collection agency in New Hampshire:
NH Consumer Protection & Antitrust Bureau
Department of Justice
1 Granite Place South
Concord, NH 03301-6397
Contact the Federal Trade Commission if you have a problem with an out-of-state debt collection agency:
Federal Trade Commission
600 Pennsylvania Ave., NW
Washington, DC 20580
1-877-FTC-HELP or 1-877-382-4357 (toll free)
If you have a debt problem and would like the assistance of a credit counselor, contact the Consumer Credit Counseling Service of NH & VT (CCCS). CCCS is a nonprofit organization with offices in several cities across the state. Look in your local telephone book for the office nearest you, or call their toll-free number:
Consumer Credit Counseling Service of NH and VT
105 Loudon Road
Concord, NH 03301