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When Debt Collectors Violate the FDCPA
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As we learned in this classic abusive debt collection story, and Craig’s awesome response, debt collectors are often unfamiliar with the law. Not only are they unfamiliar with it, they routine violate it… which means you get to collect from them.
Want an example? Let’s say you call a collector to check on the status of your dispute. They decide to solicit payment from you… that collector has just violated the FDCPA and they now owe you at least $1,000.
Oh… it gets better.
They Keep Calling After Dispute Letter
Let’s bring this all together. You receive a call from a debt collector and you send them a debt dispute letter. If they continue to call, the debt collector has just the Fair Debt Collection Practices Act (FDCPA) and they owe you not less than $1,000 per person that called.
An Invalid Validation
Ok, say you send off a dispute letter, and they respond with a generic “Yeah, we checked and you owe the money” response as their validation of the debt. The collector has just violated the FDCPA and they owe you at least $1,000.
1-2 Punch: Reporting an Invalid Debt
Ok, this is now the 1-2 punch as it is called. Say a collector receives your dispute letter, reports to your credit, then you dispute the credit reporting and they verify with the credit bureaus before sending you validation. The collector just violated the FDCPA and the FCRA (Fair Credit Reporting Act), and they owe you at least $2,000.
Why? Well, verifying an account is considered collection activity, which cannot take place before they provide validation.
Now, say a collector just reports your account to the credit bureaus and doesn’t call or write, but the reporting is inaccurate, you dispute it, and they verify. The collector now owes you at least $2,000 in statutory damages for violating the FCRA by reporting inaccurate information and the FDCPA for taking action they legally can’t do.
Calculating Damages Under FDCPA
The FDCPA allows for $1,000 per action of statutory damages which has been deemed to be per defendant. If you have multiple defendants calling you dispute and before any validation is received, each person owes you $1,000.
The company that employs them is liable under “respondeat superior,” which is latin for “let the master answer.” It’s a legal doctrine that states the employer is responsible for the actions of its employees within the course of their employment. You can just tally up the violations and lay it at the debt collectors door.
According to debt collectors, it costs about $3,500 to settle a lawsuit. $1,000 for the consumer and $2500 for the lawyer. This is on top of forgiving the debt and all negative credit reporting. In the past it was possible for many companies and collectors to hold your credit hostage if you didn’t pay, but you don’t have to be afraid any longer.
If some company reports you to a collector for a disputed debt or they are trying to extract some unfair or unearned fee, let them. Dispute, and as the collector violates the FDCPA, beat them into submission in court.
How About Mega Damages?
Here’s the fun part: Let’s say a collector finds out that you’re applying for a car loan or home mortgage (just so you know, some of the credit bureaus have notification products that inform collectors if you apply for a car or house). The collector slaps puts a collection on your report in the hopes that the mortgage company will require you to pay it before closing.
If that collector reports anything inaccurate or violates the FDCPA in their attempt to collect and it costs you a house… they owe you a new house. That is how you see some of the mega damages (6, 7, and 8 figure awards) for FDCPA and FCRA cases.
Next, we’ll talk about collecting from the collectors and how to make them pay you when they’ve violated federal law.
(Photo: jaytamboli)
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Vive la revolution!
I think it would be very beneficial for many readers if you did a segment on the different types of collectors…There are certain debts that have variations…for example student loans. That in itself is a topic worth discussing.
@Amber – I’ll second that request…I did a post on my personal blog (WealthUncomplicated) about it a few months ago because there is a distinct difference between collectors.
When I worked at Citibank as a collector some time ago, we were required to know the FDCPA inside and out. Even within these bounds, there was a wide range of collection techniques.
As to this post, I would like to know exactly how these violations are proven. Any collector (even the most vicious) will hang up if you inform them that they are being recorded. Short of a recording (which to my knowledge is inadmissible in court unless the recording is done with the other party’s knowledge), only written records would be available or messages left on a voicemail (this would be a rare instance even for the lowest of low collectors).
If you could clarify exactly how these violations are proven I’d love to read more!
By the way, most 3rd party collectors will simply re-sell the debt to another agency rather than attempt to validate the debt after a dispute. The collections world is highly profitable in part because they can buy debt so inexpensively and if they are going to have a tough time collecting, they simply re-sell it.
Cool post though…love it when greasy collectors get lit up.
You shouldn’t inform them you are recording the call, ever. Most states do NOT require consent/notification of a recording as long as one party (ie you) knows that the recording is being made.
If they give you the “calls may be recorded” disclaimer, that is the green light to record in states which require 2 party notification. Most states don’t require this at all, though.
Federal court allows recordings done without the other party’s knowledge. Federal laws support 1 party recording laws as well.
The other way are to send all letters via certified mail so you can prove when they got it.
Reselling the debt is a common violation, but that just allows you to collect from two collectors if they each violate.
Here is a Wiki link listing the 12 states that require 2 party recording notification. All other states allow recording if at least one person in the conversation has knowledge of the recording. Federal law prohibits third party recording of a telephone conversation in which neither of the two parties on the telephone call have knowledge of the recording.
oh, sorry, I forgot the link.
http://en.wikipedia.org/wiki/Telephone_recording_laws
I’ve always loved the wording “This call may be recorded….” They mean “We might record this call”, but they also mean “We have no problem with you recording this call, go ahead.”
Just one of those phrases that nobody thinks about the literal meaning.
@Damon Day – thanks for the link and the great info! This is definitely something that could be invaluable to those dealing with collections idiots.
Sure, knowing your rights is the quickest way to make a debt collector that crosses the line, curl up and go away. They will go look for easier pickings somewhere else when they learn that they can’t pull the typical stuff on you. Plus knowing what they can and cannot do will really help consumers sleep at night if they find themselves in an unfortunate situation of being behind on their bills.
@Amber Hold out a little while I think there may be something in the pipeline clarifying the differences between 1st and 3rd party collectors.
The most common violation of FDCPA is a collector contacting you at your place of employment after being informed you cannot receive personal calls. Typically shops will pay close attention to disputes and Cease and Desist’s for the very reasons pointed out in this post.
Keep in mind it is going to cost a shop a lot more the $1k to take legal action to force you to pay your debt, i.e. garnishments etc. So to some shady types it could be worth the violation if it gets them closer to collecting.
Good stuff…
It looks like we’re about to have a fight over what is considered a proper verification. There are several collectors in the 11th Circuit that think all they have to is send the generic “yeah, you owe it.”