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What Actions Must a Collection Agency Avoid?

If you are a small business with customers, chances are you'll need to employ some measure of debt collection as your customer base expands. However, there are laws instituted by the Federal Trade Commission (FTC) which prevent debt collectors from using abusive, unfair, or deceptive practices to collect from customers. Under the Fair Debt Collection Practices Act (FDCPA), a collection agency may not engage in any type of harassment or otherwise.

Keep in mind, these rules apply to debt collectors only, not the company who is owed the debt. There are state laws in place, however, that do prohibit what creditors themselves may do. Bellow, you will find more information highlighting some of the key points of the FDCPA and what actions a collection agency must avoid.

FDCPA Limitations on Collection Practices

Third-party communications: A third party communication is any communication a collection agency attempts to have with anyone other than the debtor himself. Keep in mind, these rules apply only to debt collectors only, not the company who is owed the debt. There are state laws in place, however, that do prohibit what creditors themselves may do. The collection agency cannot:

  • Contact third parties other than the debtor's attorney or a credit bureau for any reason other than to locate the debtor. Collection agents that contact third parties must state their names, and may only add that they are confirming or correcting information about the debtor.
  • Give the collection agency's name unless asked directly.
  • State that they are calling about a debt.
  • Contact a third party repeatedly unless they believe an earlier response was wrong or incomplete and that the third party has revised information.
  • Communicate with third parties by postcard or by correspondence that uses words or symbols that betray their collection motive.

Attorney-represented debtor: A collection agency cannot contact the debtor directly if he or she is represented by counsel unless the debtor gives the collection agency specific permission to do so.

Debtor communications: Collections agents may not contact debtors before 8:00 a.m. or after 9:00 p.m., or at another inconvenient time or place. Collection agents also may not contact a debtor at work if they know that the employer bans receipt of collection calls while on the job.

Harassment or abuse: Agents can not threaten or use violence against the debtor or another person. They can not use obscene or profane language. They can not publish a debtor's name on a "blacklist" or other public posting. Agents can not call repeatedly or contact the debtor without identifying themselves as bill collectors.

False or misleading statements: Agents may not lie about the debt, their identity, the amount owed, or the consequences for the debtor. They can not send documents that resemble legal filings or court papers. Agents can not offer incentives to disclose information.

Unfair practices: Agents may not engage in unfair or shocking methods to collect, including adding interest or fees to the debt, soliciting post-dated checks by threatening criminal prosecution, calling the debtor collect, or threatening to seize property to which the agency has no right.

Using an Attorney to Assist with Debt Collection

If your small business is currently working with a debt collection agency to retrieve customer debt, you likely have questions about the law. Speak to an experienced business and commercial law attorney today to learn more.

For more information, see FindLaw's Business Finances section.

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