The FDCPA Does Not Govern Every Attempt to Collect a Debt
The Fair Debt Collection Practices Act (FDCPA) is a federal law that prohibits debt collectors from using abusive, unfair, or deceptive practices to collect a debt, but you should know that it does not necessarily govern every
attempt to collect a debt.
When are debts collected by creditors governed by the FDCPA?
A “creditor” is defined as “any person who offers or extends credit creating a debt or to whom a debt is owed.” 15 U.S. Code § 1692a(4). Creditors generally are not
subject to the FDCPA, even when they’re attempting to collect on a past due debt.
How can that be? Congress believes that creditors are already restrained by a general desire to protect their good will with customers. See FTC v. Check Investors, Inc.
, 502 F.3d 159, 173 (3d Cir. 2007); Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985).
When a creditor is attempting to collect a debt under another name, thereby suggesting that a third person is attempting to collect such debt, the incentive to treat consumers fairly in order to preserve their good will disappears. In those cases, the FDCPA does apply to creditors. 15 U.S. Code § 1692a(6).
What about debts collected by third-party debt collectors?
A “debt collector” is defined as any person who regularly attempts to collect debts “owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). Unlike creditors, they generally are subject to the FDCPA.
Congress found that third-party debt collectors are more likely to have no future contact with the consumer and to be unconcerned with the consumer’s opinion of them. See Check Investors.
, 502 F.3d at 173; Perry
, 756 F.2d at 1208.
There are, of course, a number of exceptions to the general rule.
People or businesses who are attempting to collect past due debt but who are not regularly engaged in debt collection, are not considered “debt collectors” under the FDCPA. 15 U.S.C. § 1692a(6). Nor are third parties acting on behalf of the original lender. The statute does not apply to a creditor’s employees when they are attempting to collect debts for such a creditor. 15 U.S.C. § 1692a(6)(A).
The FDCPA also does not cover third parties who obtain the debt while it is still in good standing. 15 U.S.C. § 1692a(6)(F)(iii). The Third Circuit has explained that, “‘[i]f the one who acquired the debt continues to service it, it is acting much like the original creditor that created the debt. On the other hand, if it simply acquires the debt for collection, it is acting more like a debt collector.’” Check Investors, 502 F.3d at 173 (quoting Schlosser v. Fairbanks Capital Corp
., 323 F.3d 534, 536 (7th Cir. 2003)). “Thus, in determining if one is a ‘creditor’ or a ‘debt collector,’ courts have focused on the status of the debt at the time it was acquired.” Id
There are other excluded categories. The FDCPA generally does not apply to government employees or in connection with the judicial enforcement of a debt. 15 U.S.C. § 1692a(6)(C)-(D). And it does not apply to certain nonprofits that provide consumer credit counseling. 15 U.S.C. § 1692a(6)(E).
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Despite the many exceptions, the general rules – debts collected by the original lenders are usually not covered by the FDCPA, but debts collected by third parties usually are – are helpful in making an initial assessment about whether you are protected under this law.