FTC: When It Comes to the TCPA and FDCPA, Everything Counts

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For an industry that relies so heavily on communication devices to reach their targets, debt collectors have been carefully watching how the Federal Trade Commission interprets and enforces laws relating to their business for decades.  Collection agencies and collection attorneys have been paying particular attention to the Federal Debt Collections Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA) because the language of both acts – the first written in 1977 and the latter amendment created in 1991 – predate many modern technologies, especially text messaging and ringless voicemail.

The FTC has no rulemaking authority, but frequently uses its enforcement authority to telegraph how it plans to interpret rules and regulations going forward.  Recently, the FTC brought the first case against a collection firm based in Glendale, California that involved the sending of text messages and found that the firm had violated the clear disclosure rule of the FDCPA when it used text messages that made no reference to debt and did not obtain prior permission from the consumer.  The company in question agreed to a $1 million settlement and to accept guidelines for future collection attempts.

The ruling was enlightening because the FTC chose its words very carefully to state that it does not matter where the transmission was targeted (i.e., a land-line phone or device).  In fact, the FTC underlined the issue in a post to its web site, writing ‘Regardless of the means you choose — mail, phone, text, or something else — the law applies across the board.’

Thus, the FTC’s policy going forward is relatively clear: There will be no tolerance for “loopholes” regarding text messages or so-called “ringless voicemail” messages that bypass a mobile phone’s ringer and allow direct recording to voicemail.  The FTC clearly intends to regard any communication without clear and prominent disclosure as a violation of the FDCPA and/or the TCPA.

Creditors Play an Unrecognized and Powerful Role in the Debt Collection Process

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While third-party debt collectors and collection law firms get the blame when it comes to collections calls, most people don’t think about the fact that it is a creditor that is responsible for the initiation of the collection activity, and creditors pay a large role in how the collection activity is carried out.  Debt collectors are paid only if they can recover payment for the creditor and they are required to follow the laws regarding collection activity. 

Creditors claim that it is important to them that debt collectors acting on their behalf are respectful when they make collections calls because the reputation of the creditor is at stake.  One reason for this is that third-party debt collectors are often working for creditors that the customer is likely to work with again in the future. 

Utility companies, hospitals, government agencies, etc. want to maintain a decent relationship with the customers to avoid potential problems in the future.  However, despite the claims of the creditors, they are not choosing collection agencies based on their ability to uphold the reputation of the creditors. 

As unusual as it may seem, choosing a service provider based on who can provide the lowest price is the bottom line when creditors choose a collection agency.  The average amount of money they recover, known as the recovery rate, along with the price they charge, is how most creditors select a collection agency to recover the money they are owed.  The creditors, it seems, care more about who can perform the job at the least expense, rather than which collection agency has the best trained employees and the least number of complaints. 

Creditors also claim that they are strict in what they will and won’t allow collection agencies to do on their behalf; however, their ultimate goal is to recover some or all of the money owed by each customer, and they make it clear to the collection agency they hire that the recovery rate is what is of most importance to them. 

Creditors are often large corporations or government agencies, and the reality is that regardless of how the collection agency they hire to recover debt treats their customers, many of the customers won’t have the option to discontinue future services.  

Debt Recovery Tips For Better Collections

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When you have an account of a customer or client that has not been paid in some time, you may have to become proactive in the recovery of this debt.  You can either try to collect it yourself or you can hire a collection agency to do the job for you. 

Make Communication Easy

One of the things any debt collector must keep in mind is the importance of communication.  Closing all avenues of communication will have detrimental effects on any future business between yourself, if you are the collector, or your client, if you are a hired collection attorney.  You want to try to avoid that situation, especially if the debtor has been a good customer in the past.  Most problems can reach a mutually beneficial conclusion if both sides communicate.  At the same time it is imperative that the debt be paid.  Respectful but firm reminders are the best way to make your point that the account needs to be paid.

Stay Organized

As a collection lawyer, you need to be organized.  Have the debtor’s file in front of you when you make that reminder phone call.  When you call, make a note of the date and time you place the call.  Also, write down whether your call was answered in person or by the answering machine.  If a person answered, write down who this person was.  It is also helpful if you make little notes about the content of the conversation.

Calls Must Be Respectful

The call to the debtor should not contain any objectionable language.  It should be firm but polite and without any harassment in tone or content.  No matter how frustrated you are, you have to stay within the guidelines of the law.  If the debtor seems to be stalling and after a preset amount of time there is no attempt to pay, you may have to go to the next step and involve the judicial system to recover the money owed to you. 

Three Essential Steps For Successful Business Debt Collection

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The challenge for every debt collector is to be paid.  He either wants to be paid himself or, if he is working for a client, he wants his client to receive the money that is owed to him.  It is often difficult to determine who is sincerely trying to pay their bills but is unable to through no fault of their own, or who just doesn’t care that he is in default.  There are numerous reasons why a person may have legitimate problems meeting payments.  A good collection attorney will work with the debtor.  Open communication routes are the best way to get debts settled.

Know the Law

Every day, debt collectors face disgruntled debtors who cannot pay the money they owe.  This makes it difficult to have a good attitude at times.  However, a demeanor of understanding and patience, yet firmness in obtaining the owed money, will serve the debt collector well.  Many debt collectors are either collection attorneys or they work for a legal firm in another capacity.  Knowing the law and what can be said within the limits of the law, is essential.  Otherwise, the debt collector makes himself, or herself, vulnerable by breaking the law.

Offer Solutions

If the debtor is so tired of getting phone calls that he simply declines to answer, you should write letters.  Collection agencies should have some standard letters that can be revised to the individual debtor.  Make your demands known without harassing the debtor, but also offer a solution of some type of payment plan.  If the debtor is trying to repay his debt, an alternative payment plan may be the answer.

Perseverance

It often takes many repetitive calls and letters before a debtor is finally in the position to pay his loan.  Debt collectors must be very motivated to get the account closed.  Their self-motivation and perseverance are often the tools that finally collect the debt.  This may be the key to get paid by the person who originally had no intention of paying his debt.  

Good Debt Collection: Something You Can Learn Or Are You Born With It?

Do you ever wonder what makes one debt collector more successful than another?  Ever consider what they do to get receivables cleared and money coming in?  What does a successful company do differently than one that isn't?   Is it something they have a natural talent for or did they go to school for it?  With several discussions and interviews it seems to be a combination of natural personality traits as well as techniques people can use.  When you’re hiring an agency or an individual there are a few things you can look out for that will help insure you work with the right people. 

It is true that there are some natural tendencies people are born with that will help them be more successful at collecting on debts.  Some of the personality traits that lend themselves to debt collection are:

• Self-motivated and able to work independently
• Diligent
• Can separate business from personal affairs
•  Organized
•  Doesn't anger easily
• Can see through situations that are complex

Some of the skills that are taught that help with debt collection are:

• Good skills with customers
• Understanding of company policies
• Sales and marketing
• Basic accounting understanding, especially receivables
• Ability to research claims
• Techniques for skip-tracing

Generally speaking the two largest assets that are going to help a debt collector get accounts receivable in order are patience and perseverance.  Making the calls and sending out the letters consistently until items are checked of your list and money is being deposited.  When hiring debt collectors it’s important to know that perseverance and self-motivation aren't skills that can easily be taught. 

In addition to having some of these natural tendencies there are certainly skills that will need to be learned.  A solid understanding of the legalities of both the state they are working in as well as federal law will go a long way with helping insure the debt collection is done well and properly.  

Is Litigation Worth it? Rising Court Costs and the Decision of Collectors to Sue

The costs of litigation are rising but a lawsuit is still the debt collector’s strongest weapon against debtors who refuse to pay on their account.  Since the costs of litigation are the burden of the agency filing, it’s important to know just how much is too much when a creditor or collection agency is determining whether or not to file a lawsuit.  First, you have to ask the following questions concerning the collection account you’re considering for litigation:

1.       Is the claim large enough?

Many attorneys will not work with a collection case that is under$2,500.  Amounts under this amount will usually be more trouble than they are worth to litigate.

 

2.       If a commercial collection account, is the debtor still in business?

If you are collecting on a commercial account and the debtor has since closed his or her business, it’s highly likely that the assets have already been distributed.  Additionally, if the business was a sole proprietorship, you must serve the summons to the owner's primary place of business or residence, which could be difficult if the business has been closed.

  

3.       Does the debtor appear to have sufficient assets to satisfy a judgment if one is awarded?

In the business of collections, litigating a case in which a debtor doesn’t have sufficient assets to pay a judgment will likely be a waste of your valuable time and resources.  However, many creditors will still file a suit even in the absence of assets to satisfy it in order to “prove a point,” since the judgment will remain on the debtor’s record for 10 years.

 

4.       Will the court costs exceed 10% of the value of the claim? 

Generally, initial court costs should not exceed 10% of the value of the claim. If they do, in most cases, the collection account isn’t worth litigating.  

Using Asset and Bank Account Locators Effectively

The new “hot topic” in the collections industry right now is dormant collections, and debt collectors and collection agencies across the nation have begun to focus on dormant collections accounts as a valid revenue source.  However, this “hot topic” is also a topic that is fraught with concerns over regulation and litigation, and collectors should approach it cautiously, being sure to remain in compliance with Federal regulations at all times.  With careful research and properly managed dormant collection accounts, these potential revenue sources can help a collection firm offset the costs of litigation and resources needed for asset searches.

 

When beginning a dormant collection, a collection agency or collection law firm should first validate the judgment.  Often, this is easier said than done.  In many cases, the balances shown on the court documents are incorrect, the information doesn’t line up, or there are other issues that might cause compliance issues if not thoroughly validated.

 

After complete and thorough validation of the debt and the debtor’s responsibility to pay it, the firm should then find a solid source for asset location.  It’s important to remember in this step that accuracy rates for even the best asset locator sources are rarely more than 20% and often closer to 5%.  This inaccurate information can end up costing the creditor or collection holder even more valuable time and money.

 

Collections firms who specialize in dormant judgment validation and collection will often have the resources to perform skip tracing and asset location without hiring a third-party firm.  However, these searches take considerable time and money, two resources that many collections firms have little of.  Once a dormant judgment is established, validated and located, the collection firm can then use tactics such as wage garnishments to ensure that the collection will be processed and time and money are well spent.  

Debt Collecting- An Uphill Battle

Debt collecting is getting harder and harder.  The reason for this increase in the difficulty of collecting debt is related to the increase in rights that are given to the one that is in debt.  The government offers less protection on the part of the lender.  Nowadays, it is the one that is in debt that gets the most protection.   Take a look at a few regulations that make it nearly impossible to collect debt in a timely fashion. 

The word ‘harass’ is not used sparingly in the bounds of the debt collectors regulations.  Pretty much anything more than a few calls can constitute as harassment under the government’s eyes.  Debt collectors are not allowed to make repeated phone calls.  This obviously poses a problem for a collector when the person they are trying to reach is dodging them. 

Debt collectors are not allowed to call a person before 8am or after 9pm.  With that being said, they are also not allowed to call the borrower at their place of employment if you specify.  How can the debt collector reach their prospect if their work hours are the entire day?  It begins to be a cat and mouse game of making phone calls in hopes that you will get lucky enough to reach the person.  Good luck reaching them if they are expecting your call.

As if debt collecting isn’t hard enough, the person in debt can also make a request to only be contacted through mail.  Once this request is made the debt collector is no longer allowed to make phone calls.  With this method, the collector doesn’t even have the opportunity to ensure the one in debt is reading the letter or getting the message. 

With the rise of debt also comes the rise of protection against those in debt.  Debt collecting isn’t going to get easier as long as the government continues to offer maximum support to the one in debt and minimal support to the collector.  

Florida Broadens the Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) gives all debtors some rights when it comes to collecting debt.  Often times, collectors only have one motive, and that is to collect the money.  The collectors or creditors don’t tend to take into consideration the damage they are causing in the process of them gaining their claim. The Fair Debt Collection Practices Act is provided to protect the debtors from unlawful collecting tactics that have been used in the past.

Some of the things that the Fair Debt Collection Practices Act prohibits are:

·         Contacting consumers outside of  8:00 AM and 9:00 PM

·         Misrepresentation

·         Harassing the consumer with phone calls

·         Publishing the consumer’s name on a ‘bad debt’ list

·         Communicating with a consumer at their work after being asked not to

The list of protection that the FDCPA offers extends far past that, however Florida has taken those laws and broadened them.  Florida’s laws protect the consumer more.  Their laws also apply to creditors as opposed to the FDCPA whose laws only apply to collectors. 

Florida also gives legal rights to the consumer.  If a collector or creditor has been abusive, or has broken one of Florida’s guidelines, the consumer may sue in a court of law.  The compensation that would be received would be for punitive damages. 

Some of the statutes that Florida upholds include:

·         Collectors are not allowed to communicate with the debtor during inconvenient times

·         Collectors are prohibited from mailing collection requests in a clear envelope

·         Collectors are not allowed to harass the debtor’s family

When it comes to debt collectors, Florida’s laws seem to favor the consumer.  Florida takes an already strict set of guidelines and expands them further in hopes to make a fairer environment for the debtor.  

Do Debt Collectors REALLY Need to Follow Their Industry Regulations?

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You don’t need me to tell you the debt collection field is filled with unscrupulous individuals looking to make a quick buck by taking advantage of the desperation of both their clients and their debtors. Left to their own devices, most debt collectors would employ every thug tactic they could think of in order to get debtors to pay up. Thankfully the debt collection field is highly regulated and any law firm or agency looking to collect debts needs to comply with these laws to the letter if they want to stay in business.

The two primary sets of regulations relating to the debt collection field are the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA). Let’s take a minute to outline what these acts state when it comes to how we can perform our duties.

The TCPA was primarily designed to rein in telemarketers, but it applies to debt collection agencies and firms as well. Under the TCPA, no debt collection professional is allowed to do the following actions:

• Call between 9 p.m. and 8 a.m. local time
• Call individuals on the Do Not Call list
• Refuse to provide their agency’s identifying information
• Solicit using automated messages
• Engage more than 2 lines of a business with automated calls

Each instance of breaking one of these regulations can result in a fine of $500 - $1,500 a piece, making the TCPA costly to violate!

The FDCPA works in much the same way, but isn’t limited exclusively to regulating telephone calls. Under the FDCPA, debt collectors can’t misrepresent themselves, their intentions, or their capabilities. The FDCPA also prevents collectors from being able to embarrass or harass their debtors through a variety of once-common practices.

For legal, financial, and ethical reasons, it’s wise to ONLY work with debt collectors who follow these regulations as closely as possible!