The Fair Debt Collection Practices Act (FDCPA) (15 USC 1692 et seq.), which became effective in March 1978, was designed to eliminate abusive, deceptive, and unfair debt collection practices. It also protects reputable debt collectors from unfair competition and encourages consistent state action to protect consumers from abuses in debt collection.
The FDCPA applies only to the collection of debt incurred by a consumer primarily for personal, family, or household purposes. It does not apply to the collection of corporate debt or debt owed for business or agricultural purposes.
The FDCPA defines a debt collector as any person who regularly collects, or attempts to collect, consumer debts for another person or institution or uses some name other than its own when collecting its own consumer debts.
The FDCPA defines who is a “consumer”, when, where and with whom communication may be permitted with a consumer and third parties, and when communications must cease.
The FDCPA contains a number of provisions that debt collections must follow in the collection of a debt including:
The Consumer Financial Protection Bureau (CFPB) issued a final rule under 12 CFR Part 1090 which allows the CFPB to supervise large debt collection participants, such as agencies, as well as write future regulations for the industry and enforce them as necessary.
CFPB’s examiners will be looking for potential risks to consumers and whether entities are complying with requirements of federal consumer financial laws, especially the FDCPA. In particular, examiners will be reviewing the practices of debt collectors in at least the following areas:
Under the rule, a nonbank covered person is a larger participant of the consumer debt collection market if the nonbank covered person's annual receipts resulting from consumer debt collection are more than $10 million. The CFPB has begun notifying larger participants and begun on-site examinations and monitoring through its compliant process.
With some limited exceptions, the rules use the same definition for a debt collector as found in the FDCPA. Generally, the rule will include collection agencies, debt buyers and collections attorneys. The CFPB has estimated that it will cover about 175 debt collectors, which accounts for over 60 percent of the debt collection industry’s receipts.
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