FDCPA Updates for
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Update from: May, 2002

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FTC CLARIFIES WHEN FDCPA APPLIES

In a rare opinion revision, the Federal Trade Commission revoked a two-year-old opinion and clarified its stance on when and to whom the Fair Debt Collection Practices Act applies. In an opinion letter to TSYS Debt Management dated May 23, 2002 and made public, FTC attorney Thomas E. Kane, who heads up FDCPA enforcement, addressed a number of sections of the statute.

When Are Collection Activities Covered by the FDCPA?

The situation under consideration is one where a collection agency’s employees collect accounts that are 2-4 months past due at the agency’s location, under agency supervision in the name of the creditor. TSYS had originally asked for a staff opinion about whether the FDCPA applies to such activity when the accounts are in default or when they are not in default.

Kane emphasized that each creditor determines when default occurs and that the FTC would expect to see reasonable, written guidelines for determination of default. The guidelines must be applied to all accounts consistently for determining various types of account management actions, not simply for the purpose of assignment to a third party for collection.

Based on such determination, Kane responded that the FDCPA would apply if debts were contractually in default at the time of collection activity by a collection agency. In such situations, TSYS’ employees and other debt collectors are covered by the FDCPA because their collection practices and procedures are controlled by the employing agency.

But Who Is Doing the Collecting?

In a final point made in closing, Kane addressed an issue apparently not specifically included in the original request for opinion. When third parties collect pre-charge-off (non-default) accounts in the name of the creditor, it is a violation of the FDCPA prohibition of debt collectors representing themselves to consumers as employees of the creditor, rather than of the agency:

“If the agency is a ‘debt collector,’ it may not use the creditor’s name when communicating with consumers from whom it is attempting to collect debts; 
it must use
 its own."

 Want to make sure your collection staff knows how to apply the FDCPA? Contact us today for a free demonstration of our self-directed, interactive CD-ROM course, The Fair Debt Collection Practices Act.

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