the fdcpa: regulating debt collection abuse
The Fair Debt Collection Practices Act (FDCPA) protects debtors from abusive conduct by debt collectors or from creditors that believe incorrectly that a debt is in default. We will utilize the FDCPA as a shield against these predatory debt buyers to verify that the debt is yours and stop the collection calls. If the FDCPA has been violated, we can use the Act as a sword by filing a complaint against your debt collectors in a court of law.
I. PURPOSE OF THE FDCPA
The Fair Debt Collection Practices Act, or the FDCPA, is a consumer protection statute first enacted by Congress in 1978 to regulate the misconduct of debt collectors. Under the FDCPA, the term “debt collector” generally applies to debt collection agencies, creditors using false names, creditors collecting for other creditors, purchasers of delinquent debts, repossession and foreclosure companies, and suppliers or designers of deceptive forms. The Act defines the term “consumer” as “any natural person obligated or allegedly obligated to pay any debt” and the term “debt” as any obligation or alleged obligation of a consumer to pay money that was incurred for personal, family or household purposes. Commercial or business debts are not included.
II. CONDUCT PROHIBITED
The Act prohibits debt collectors from engaging in the following conduct towards consumers committed in the collection of a debt: invasion of privacy, harassment, abuse, false or deceptive statements, and unfair collection methods. Some of the most commonly committed abuses by debt collectors are:
1. Late night, threatening, insulting or intimidating phone calls;
2. Repetitive and harassing phone calls on a daily basis;
3. Any threats of legal action involving criminal prosecution;
4. Any communications containing false or deceptive statements, including inflated debt amounts, incorrect information, and false names; or
5. Calls or letters to family members, employers, or co-workers.
Some of the most common types of debts that are collected in violation of the Federal Debt Collection Practices Act are Pay Day Loans, old credit cards debts that are no longer being collected by the original credit card company, and cash advances loans. Other common debts that trigger the FDCPA are rent, medical bills, utility bills, insurance bills, student loans, condominium and HOA fees, judgments, obligations discharged in bankruptcy, mortgages, and fees from an automobile agreement.
III. DEBTOR’S RIGHTS
In addition to the prohibited conduct outlined above, the FDCPA provides consumers with affirmative rights to combat the illegal conduct committed by debt collectors. First, the consumer debtor is entitled to receive a Verification Notice from the debt collector within five (5) days of the first contact with the debtor, whether by phone, email or letter. The Verification Notice is commonly titled “Validation of Debt” and must include: the name of the current creditor, the debt collector’s name and address, a statement that the debt collector will assume the debt is valid if the consumer does not dispute the debt or a portion within thirty (30) days, and an explanation of the procedure for obtaining verification of the debt. Failure to send the Verification Notice containing all of this information is a violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692g.
Second, a consumer debtor, individually or through an attorney, may request verification in writing of the debt being collected. This request is commonly called a “Verification of Debt Letter” and is fully described under 15 U.S.C. § 1692g(b). The Verification of Debt Letter should be sent within the first thirty (30) days of the initial contact by the debt collector, although the consumer should send the letter even if the 30 days have elapsed. The Verification of Debt Letter should request an itemized statement of the amount of the alleged debt, why the debt or amount is disputed (if applicable), and the identity of the current creditor and its predecessor in interest. Once received, the debt collector must cease all collection activity until it provides a written response verifying the debt.
IV. CIVIL RELIEF & LIABILITY
The Fair Debt Collection Practices Act contains a private right of action for consumers against debt collectors in a court of law. This means that a debt collector using any of the abusive practices named above, or that fails to provide a Verification Notice, or that fails to respond to the Verification of Debt Letter may be subject to civil liability in a court of law, meaning that the consumer may have a potential lawsuit against the collector. Under 15 U.S.C. § 1692k(a)(1), debt collectors in violation of the FDCPA are liable for “actual damages” suffered by the consumer as a result of the failure by the debt collector to comply with the Act. A few examples of actual damages include lost wages, cost of obtaining an unlisted number, credit damage, mental anguish, and physical injuries like heart attacks, ulcers, hypertension, and insomnia. A successful FDCPA claim also requires the debt collector to pay the debtor’s reasonable attorney’s fees, the costs of bringing the lawsuit, and statutory damages up to $1,000.00 even if the debtor has not suffered actual damages or if actual damages cannot be proven. Punitive damages are also awardable, but only in the most egregious of cases.
V. CONSUMERS SHOULD BE PROACTIVE
If you believe you are the victim of any of these prohibited debt collection activities, it is imperative that you maintain or start making detailed notes of the time and place of each contact by the debt collectors, including the employee’s name, the company name and contact information (address and phone number), and a brief description of the communication. It is important to be proactive. Do not hesitate to send a Verification of Debt Letter to the debt collector that includes your name, account number, and any dispute you may have concerning the alleged debt owed. If the collection activity continues or any violations listed above have occurred, then you should contact an attorney.
KEY WORDS: FAIR DEBT COLLECTION PRACTICES ACT, FDCPA, DEBT COLLECTOR, CONSUMER DEBT, CREDITOR, DEBTOR, VERIFICATION OF DEBT, HARRASS, FALSE, MISLEADING, CRIMINAL LIABILIT FOR DEBT.
The Real Estate Settlement & Procedures Act (“RESPA”) – 12 U.S.C. § 2605
I. PURPOSE OF THE RESPA & SECTION 2605
The Real Estate Settlement and Procedures Act (“RESPA”) is a consumer protection statute enacted by Congress to regulate the residential real estate industry by prohibiting unnecessarily high settlement charges and other abusive practices by mortgage servicers. “Mortgage Servicers” are the companies that manage your mortgage loan account by accepting payments, managing the escrow account (if applicable), and/or sending you statements every month. Section 2605 of the RESPA prohibits specific conduct of mortgage servicers and also imposes duties upon them.
II. QUALIFIED WRITTEN REQUEST – 12 U.S.C. § 2605(e)
Under 12 U.S.C. § 2605(e) of the Real Estate Settlement and Procedures Act, borrowers have the right to send out a written request for information and/or written dispute to their mortgage loan servicer regarding their mortgage loan account. This written request for information and/or dispute is called a “Qualified Written Request,” or “QWR,” and creates certain duties with which the mortgage servicer must comply. A proper Qualified Written Request (QWR) will be in writing, identify the borrower by name, address, and include the loan number and/or account number. The QWR should always describe the borrower’s account dispute in detail (if applicable) and request the following types of information: breakdown of the loan balance, including a detailed itemization and explanation of all fees and charges that are not principal or interest, a detailed escrow account statement, the current interest rate, the payoff amount, the identity and address of the current creditor, and any other information sought by the borrower. Additionally, the borrower should always date and sign the QWR and send the letter certified mail so that there is a record of receipt by the servicer. Be sure to send the QWR to the customer service department, dispute department, or Qualified Written Request department; whichever is designated on your account statement.
Once the servicer receives the Qualified Written Request, the duty to respond will arise for the servicer, which has twenty (20) business days to provide notice acknowledging receipt and sixty (60) business days to provide a detailed response and correct the error on the account (if applicable) or provide a statement as to why it believes the account is correct. If the account is disputed, the mortgage servicer must cease all negative credit reporting on the account for sixty (60) days while it conducts a reasonable investigation of the dispute.
III. PRIVATE RIGHT OF ACTION – 12 U.S.C. § 2605(f)
A failure by the mortgage servicer to comply with any of these QWR provisions (or violations by the servicer of any of the provisions outlined below) will subject the servicer to civil liability in a court of law. Section 2605 provides a Private Right of Action for violations of the QWR process that entitles the borrower to actual damages suffered by the borrower, attorney’s fees, costs of the lawsuit, and statutory damages up to $2,000.00 in the case of a pattern of violations by the servicer. “Actual damages” must be caused by the servicer’s violations and can include late fees, foreclosures fees and costs, mental anguish, time or lost wages, expenses, and other damages suffered by the borrower.
IV. SPECIFIC CONDUCT PROHIBITED – 12 U.S.C. § 2605(k)
Section 2605 of RESPA also prohibits specific conduct by mortgage servicers commonly associated with predatory lending. First, the RESPA prohibits mortgage servicers from “force-placing” hazard insurance on your mortgage loan account unless there is a reasonable basis to believe that your insurance policy has lapsed. “Force-place insurance” means insurance coverage obtained by the servicer because the borrower failed to maintain or renew the hazard insurance policy on the home. If your mortgage account has never had an “escrow account” and you have always paid your taxes and insurance directly to the government and insurer, then the mortgage servicer has likely violated this provision, as long as your policy and taxes are current. You must send the servicer written proof of insurance coverage via a policy number and/or insurance contact agent. After your proof has been provided, failure to remove the force-place insurance within 15 days constitutes a violation by the servicer.
Additionally, a mortgage servicer may not charge fees for responding to the QWR, must correct the account within sixty (60) business days, and must comply with any other obligation imposed by the Consumer Financial Protection Bureau by regulation.
A mortgage servicer committing any of the prohibited conduct of this provision triggers the same Private Right of Action as the QWR section above.