Fairway Capital Recovery Blog

Debt Collection Laws: FDCPA 101

Posted by Matt Alkire on Mon, Mar 31, 2014

There are many laws and agencies that regulate debt collectors, but one of the most significant is the Fair Debt Collection Practices Act (FDCPA). Enacted in 1978, the FDCPA's goal is to protect consumers from abusive debt collection practices.

Debt collection laws

Ways in which creditors can collect debts

According to the FDCPA, there are several ways creditors can attempt to collect debts, including:

  • Communicating directly with the debtor
  • Filing a lawsuit against the debtor
  • Hiring a debt collection service

 Ethical standards for collectors

The FDCPA only governs the ethics of third party debt collection services, not the original creditor. But many states have laws that regulate the original creditor as well.

Here’s a brief overview of what collectors can and cannot do according to the FDCPA:

  • Debt collectors cannot use “any false, deceptive or misleading representation or means in connection with the collection of any debt.”
  • Collectors cannot annoy, harass or make false threats to debtors (for example, collectors are not allowed to threaten legal action unless it is a real probability).
  • In their first communication with a debtor, typically a debt collection letter, collectors must provide basic information about why they are being contacted and notify debtors that they can challenge the validity of the debt.
  • Collectors cannot contact a debtor directly if they know he or she is represented by legal counsel.
  • Collectors can only contact debtors between 8:00 a.m. and 9:00 p.m. (including holidays and weekends, unless the collector knows or has reason to know that doing so would be inconvenient).
  • Collectors must stop all further communication if the debtor so demands it, but only if the demand is in writing.

There are also rules about how debt collectors can communicate with third parties when trying to locate a debtor, intended to protect the individual’s privacy.

How the regulations are enforced

On a federal level, the Fair Trade Commission (FTC) has traditionally enforced the FDCPA, but in recent years, a new agency called the Consumer Financial Protection Bureau (CFPB) has begun regulating third-party debt collectors. On a state level, the attorney general’s office is responsible for enforcing debt collection regulations.

Individuals may also take legal action against debt collectors who have violated the law, and they can recover damages and attorney’s fees if their suit is successful.

The takeaway for businesses

Businesses should ensure they only work with debt collectors that comply with the FDCPA and all other regulations. After all, collection agencies are communicating with your customers on your behalf, and any legal issues could spell trouble for your reputation and bottom line. Ask your collection agency partner about what policies and procedures they have in place to maintain compliance with industry regulations.

Learn more about the steps Fairway Capital Recovery has taken to reduce the risk of non-compliance—get in touch with us today.


Sources: InsideARM, Cornell University Law School

This content is intended for educational purposes only and should not be considered legal advice.


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Topics: debt collection services, financial regulations, debt collection laws