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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