At our law firm, we represent creditors and debt collectors throughout the life cycle of collecting on a debt. The practice of debt collection is far more than just securing money owed, which is of course the primary goal and the main component of business success.
Collecting debt in an ethical manner, however, is arguably as important. Any business or professional entity that collects debt for itself or for third parties must protect its reputation and good will with its clients, with other collectors, with government regulators, and with debtors by ethical interaction and business practices.
Ethics in collection is grounded in two sources: federal and state laws, and codes of ethics from professional organizations. Relevant ethical standards revolve around respect, honesty, professionalism and compliance with the law.
In today's Part 1 of this post, we will talk about ethical standards embodied in the FDCPA and other laws.
Congress enacted the federal Fair Debt Collection Practices Act in response to the history of "abusive, deceptive, and unfair debt collection practices." The FDCPA regulates, in detail, third-party collectors of personal or household debts. The Act imposes an ethical structure within which covered collectors operate with integrity and fairness.
The FDCPA imposes practices and standards concerning:
- The time, place and circumstances under which a collector may communicate with a debtor
- Instances when a collector must communicate instead with a consumer's lawyer
- The third parties with whom a collector may talk about a consumer debt
- Prohibition of collection behavior "to harass, oppress, or abuse" anyone, including threats, obscene or abusive language, harassing phone calls and more
- Prohibition of "false, deceptive, or misleading representation" in collections, including falsely saying that the collector is with the government or is an attorney, or that the debtor will be arrested or jailed for nonpayment, among many other enumerated, prohibited falsehoods
- Prohibition of "unfair or unconscionable means" to collect debt
- Provision of detailed information about the debt
- Procedures for behavior when the consumer disputes a debt
- Prohibition of deceptive forms
- And others
The Federal Trade Commission is the primary agency that enforces the FDCPA. The law also gives debtors the right to sue for damages and legal fees for violations individually or as part of a class of consumers. However, a debt collector is not liable if there was no intent to violate the Act or the violation was from a "bona fide error."
Above and beyond the legal requirements of the FDCPA, its provisions set standards for ethical choices and behavior.
Each state has its own consumer protection laws that may regulate the ethical behavior of debt collectors in dealing with personal debts. In addition, state laws may regulate the collection of business, as opposed to consumer, debts. It is important for a debt collection company to have legal counsel who can provide advice and guidance for compliance in each applicable jurisdiction.
In Part 2 of this post, we will talk about the ethical codes promulgated by professional associations for collectors.