QUESTION
We need help with revising our debt collection procedures. A few weeks ago, our regulator notified us that our debt collection policies are "defective" in the area of communicating with the consumer. We were shocked because we had passed previous exams.
The two problem areas cited by the regulator involved the requirements for contact with the consumer and when an attorney represents the consumer.
We have been in touch with your firm to help us with this project. However, I hope you will let other companies know about these issues since I’m sure they always come across them.
What are the general requirements for communicating with a consumer for debt collection?
Also, what is the prohibition against communicating with a consumer if an attorney represents the consumer?
ANSWER
I will provide an answer that is generally responsive to your question. Keep in mind that the requirements of the regulatory framework that is foundational to debt collection, the Fair Debt Collection Practices Act (FDCPA), are rather vast, and there are plenty of regulatory minefields. We're glad to help you with a comprehensive policy document that reflects your compliance needs; however, much also depends on an institution’s size, complexity, and risk profile.
Under the FDCPA,[i] a debt collector must have the prior consent of the consumer, or the express permission of a court of competent jurisdiction, to communicate with the consumer in connection with the collection of any debt.
Essentially, there are three communication prohibitions. The debt collector should not contact the consumer
1. At any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer;
2. Directly, if
the debt collector knows the consumer is represented by an attorney concerning
such debt and has knowledge of, or can readily ascertain such attorney’s name
and address, unless
o
the attorney fails to respond within a reasonable
period of time to a communication from the debt collector
o or unless the attorney consents to direct communication with the consumer; or
3. At the consumer’s place of employment, if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.[ii]
I am often asked what constitutes an unusual or inconvenient time or place to contact the consumer.
In the first place, without the required prior consent of the consumer or court authorization, a debt collector may not contact the consumer on any date, at any time, or in any place if the debt collector knows or should know that such time, date, or place is inconvenient. I hope I am making myself clear and unambiguous! Note, the term “consumer” includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or an administrator.[iii]
Contact between 9:00PM and 8:00AM is presumed to be unusual and inconvenient.[iv] The Federal Trade Commission (FTC) has taken the position that contacts on Sunday are not presumptively unusual or inconvenient. But I advise you not to call a consumer on Sunday.[v] The courts and the FTC may view communications with certain types of employees at their places of employment as inherently inconvenient. Examples abound, such as contacting a nurse or doctor at a hospital or a waiter at the employing restaurant.
So is there a rebuttal defense if the debt collector calls at an inconvenient time, date, or place? Not if the consumer has informed the debt collector, even casually or informally, that a particular time or place of contact is inconvenient. If the consumer informs the debt collector and the debt collector knows or should know that a time, date, or place is inconvenient, courts will generally find actual knowledge pertains. In fact, courts will often impose a burden of reasonable inquiry on the debt collector to determine what times or places are inconvenient.
As to a debt collector learning – even indirectly or informally – that an attorney represents a consumer, the debt collector must contact only the attorney, not the consumer. The only exception that pertains here is obtaining the prior consent of the consumer or the attorney.
But, there is no “should have known” language in the applicable statute. Consequently, it is more difficult to impute knowledge to the debt collector than under the FDCPA prohibition against contacting the consumer at an unusual or inconvenient time or place. Thus, if a debt collector knows that an attorney represents a consumer with respect to a debt, the debt collector is not required to assume similar representation with respect to other debts the consumer owes.[vi] A creditor’s knowledge of a consumer’s representation is not automatically imputed to the debt collector.
Plenty of FDCPA cases wind up in court. Courts will vary in deciding what contacts are subject to restriction when a debt collector knows the consumer is represented by an attorney and what constitutes a valid nullification of the restriction.
Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
[i] Fair
Debt Collection Practices Act (FDCPA), 15 USC § 1692c(a)
[ii] Idem
[iii]
15 USC §
1692c(d)
[iv]
15 USC §
1692c(a)(1)
[v]
FTC Staff Commentary on FDCPA, § 805(a)
[vi] FTC
Staff Commentary on FDCPA, § 805(a)(3)
