John L. Fallat

In 1977, Congress enacted the federal Fair Debt Collection Practices Act (FDCPA).  Even though many states have enacted similar laws, the FDCPA will take precedence over state law, unless state law provides greater protections.

Provisions of the FDCPA

The FDCPA regulates the conduct of “debt collectors” (including attorneys) who regularly collect debts that were incurred for “personal, family or household” purposes.  The FDCPA requires certain disclosures by the debt collector and prohibits other specified conduct, including conduct that constitutes:

• Harassment or abuse
• False or misleading representations
• Unfair or unconscionable practices

Consumers/debtors who are subjected to such conduct by a debt collector are given two ways to seek redress under the FDCPA.

Civil Lawsuit by the Debtor

If a debt collector violates any of the provisions of the FDCPA, the aggrieved debtor may bring suit in state or federal court, but only within one year of the violation.  Recovery by the debtor/consumer may include:

• Any actual damages sustained as a result of the misconduct
• An additional award of up to $1,000, awarded at the discretion of the judge
• Costs of the successful action, including attorneys’ fees

If suit is filed against the debt collector as a “class action,” (i.e., multiple debtors with the same or similar complaints join in one action), the court may award up to $1,000 for each participant, up to a maximum of $500,000 or 1% of the net worth of the debt collector, whichever is less.  If the court finds that the suit was brought in bad faith, however, it may allow the debt collector to recover its reasonable attorneys’ fees.

Standards for Awards by the Court

In deciding what penalties to apply, the court is authorized to consider:

• The frequency and persistence of the debt collector’s violations of the FDCPA
• The nature of the noncompliance with FDCPA
• The extent to which the violations were intentional

Administrative Enforcement Actions

Enforcement of the FDCPA is assigned to the Federal Trade Commission (FTC).  Debtors/consumers who believe that they have been the victims of a FDCPA violation may file a complaint directly with the FTC and/or the proper state authority.  In response to consumer complaints, or other reports of misconduct, the FTC may conduct an investigation.  The FTC reported that it received more than 25,000 complaints regarding debt collectors in 2002.

In an attempt to avoid filing a lawsuit, the FTC will usually first inform the violator of its findings.  The FTC typically attempts to settle any violations through a consent judgment (whereby the debt collector acknowledges the violation(s) and agrees to the imposition of penalties and fines).  If the violator agrees, the consent judgment is forwarded to the federal Department of Justice, and then filed with the appropriate federal court.  If the violator does not consent to the judgment, the FTC may file suit.