The Debt Relief Learning Center
This section is designed to provide a wealth of information and advice for people looking to increase their knowledge of the Credit and Collection Industries, Debt Relief Options, various Debt Instruments, and Personal Finance.
Below you will find the Fair Debt Collection Practices Act, a Glossary of Financial Terms, and original articles.
Credit Card Secrets
The credit card industry is sheepishly hiding behind many secrets that help to make it one of the most profitable industries in our country today. Below are ten secrets every consumer should know before entering into an agreement with a credit card company.
1. Cash Advance Fees: Almost all credit card companies charge a transaction fee as well as finance charges for all cash advances a client may receive. Transaction fees are known to be as high as 2.5% of the cash advance. Keep in mind that the interest is charged from the day the advance takes place.
2. Introductory “Teaser” Rates: Watch out for the all too common introductory or teaser rates most credit card companies will offer you. While you may receive an enticing offer with a low rate this is probably not in your best interest. Reason being, once the low rate introductory period ends, you may be subject to a much higher rate on the items purchased at the original introductory rate. This is when the creditors begin to reap the benefits of the low rate offer.
3. Interest Backdating: This occurs when a creditor charges you interest from the day you purchase an item with their credit card. The problem with this scenario is the creditor is charging you interest when they have not even paid the vendor on your behalf.
4. Right to “Offset” or “Setoff”: Most consumers do not realize that when they have a personal bank account and also a credit card with the same bank that they may be subject to “offsetting” or “setoff” if they default on the credit card. In short, the bank may be able to deduct funds from your personal bank account and apply it toward the delinquent credit card. Read the fine print when your bank asks you “would you also like to apply for our credit card”.
5. Shortened Due Dates: Many banks have shortened the grace period from 25 days to 20 days. This is usually for clients who pay their entire bill every month. If you are in this category ask for a 25 day grace period.
6. Two Cycle Billing: If you have neglected to pay your monthly bill in full and resort to carrying a balance from month to month you may be subject to “two cycle billing”. With this type of interest calculation the creditor will charge you two months worth of interest for the first month that you did not fully pay your balance.
7. Late and Over-limit Fees: Both late fees and over-limit fees have steadily increased over the past 10 years. Late fees are usually assessed at $39 each time you are past due on your credit card accounts. Some companies have enacted cut-off times during the day for when the payment can be received without being charged a late fee. This makes it easier for the credit card company to justify a late fee. As for the over-limit fee it to is usually set at $39 each time your credit card goes over the given credit limit. All too often consumers are finding out that their late fee has caused the account to go over the credit limit. This is equal to $79, but do not forget that the creditor is also going to impose a finance charge-which is set at their discretion.
8. Erroneous Interest “Usury” Rates:
Most consumers have no idea that credit card companies located in both Delaware and South Dakota are free to charge the rate they best see fit. This is because the respective legislature in both states eliminated the cap on interest “usury” rates in the 1980’s. It is a no brainer why most credit card companies are located in one of these states. Now it should make sense why some consumers are assessed as much as 40% APR and some even higher.
9. Benefits? I thought I had some: Buyer beware...the at “one-time” well known benefits offered by most credit card companies are diminishing or are all together disappearing from those supposedly great credit card offers received in the mail.
10. Minimum notice change: The creditors have devised a method of including clauses in their clients’ contracts that allow them to adjust your interest rate for any reason, and at anytime. The only condition is that they must give the customer 15 days notice. If you make a purchase at 5% interest they can go back and change the rate. Can you imagine if other industries where allowed to engage in this deceptive practice?
How to Build Credit
Have you ever been denied for a loan because of limited or no credit history? This puts many people in a peculiar bind. It can be very frustrating to get denied for a loan, especially if you are trying to obtain the loan to build your credit in the first place. If you are in this situation, follow these steps to start building up your available credit.
• Stay current on the bills you already have. Delinquent bills and obligations of all kinds can show up on your credit report and this will make it difficult to get accepted for credit. Lenders want to see a healthy financial picture on your credit report across the board.
• Try to apply for a credit card or two. Remember to start small, maybe a department store or gas station card. If you get denied, don't keep applying for other cards hoping to get lucky. Too many inquiries on your credit report will make you seem desperate to the lenders.
• Your bank or credit union can be a great place to get your first credit card. Make some regular deposits to your account and be sure not to bounce checks or overdraw the account. Next apply for a secured credit card. The limit on this card will be secured by the money you have deposited in the bank. If you have no credit history the bank will be more likely to approve you for this type of card because if you default the bank has the option of using the funds in your bank account to satisfy the debt.
• Once you have a credit card, secured or unsecured, use it sparingly and pay it off every month. This is imperative to build a solid payment history which is essential to get approved for larger loans in the future such as a mortgage.
• As you build more and more available credit, be aware of common credit traps offering you quick cash or enticing you to spend beyond your means. Credit card companies do not make billions of dollars per year off of people who pay their bills in full every month.
Make sure to not get in over your head and keep your financial goals in mind. It makes sense to build credit to qualify for a good mortgage or for emergency purposes, but not for extra spending money. As long as you stay disciplined your credit score and available credit will improve.
The Basics of Credit Consolidation
In essence, a credit, or debt, consolidation is the act of receiving one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Credit consolidation can simply stem from a number of unsecured loans into another unsecured loan, but more often than not it involves a secured loan against an item or asset that would serve as collateral—often times a house. A mortgage is usually placed and secured against the house to lower interest rates. By collateralizing, the asset owner agrees to allow the forced sale, or foreclosure, of the building to pay the loan, which in turn reduces the risk involved – for both the lender and borrower—thereby reducing the interest rate offered.
Occasionally, credit consolidation companies will offer a discount on the total amount of the loan. When the debtor is in danger of bankruptcy, the consolidator will buy the loan at a discount. A thrifty debtor can shop around and will usually find some consolidators who are willing to pass along some of the savings. When considering consolidation, make sure to weigh the decision carefully as it can affect the ability of debtors to discharge debts in bankruptcy.
The theoretical advantages that debt consolidation offers to a consumer that has high interest debt balances are numerous, allowing companies to take advantage of the benefit of refinancing to charge very high fees in the debt consolidation loan. On the contrary, debt consolidation is often advisable in theory when someone is paying credit card debt. Credit card debt can carry a much larger interest rate than even unsecured loans from a bank. Collateralization is advisable here as well as it allows for a lower rate through a secured loan thereby making the total interest and the total cash flow paid towards the debt lowered allowing the debt to be paid off sooner, incurring less interest.
Be aware that some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that are already behind on minimum payments. Meaning if the client does not refinance, they may lose their house or car, i.e. the collateral, forcing the client to accept interest rates much higher than they would during a time of financial stability. To put it into other words, the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. The combination of these factors gives rise to deceitful “Predatory” lenders who try and take advantage of people in dire situations. At this point it is exceedingly important for the debtor to make educated and thoughtful decisions, even in the face of growing financial pressure.
The Debt Relief Industry
Credit consolidation can simply stem from a number of unsecured loans into another unsecured loan, but more often than not it involves a secured loan against an item or asset that would serve as collateral—often times a house. A mortgage is usually placed and secured against the house to lower interest rates. By collateralizing, the asset owner agrees to allow the forced sale, or foreclosure, of the building to pay the loan, which in turn reduces the risk involved – for both the lender and borrower—thereby reducing the interest rate offered.
Credit counseling, founded 50 years ago and partially funded through ‘Fair Share’ by the credit card companies themselves, offers consumers a program with a non-profit credit counseling agency designed to lower interest rates and create a repayment schedule. Credit counseling can easily be named as the better known method of absolving consumer debt. However, credit counseling is not without its drawbacks. Consumers enrolled in the program will often face problems with mortgage lenders as credit counseling is thought of as analogous to a Chapter 13 bankruptcy. Credit counseling also forces the consumer to pay back 100% of debt including interest and fees. This takes the average American over 5 years, sometimes even more, to complete. The fact that a consumer will be also be disqualified if delinquent on their accounts, does not help the industry’s already low graduation rate. Credit Counseling can work well in certain situations but for the majority the negatives outweigh the positive aspects of the program.
Other than the do-it-yourself method, the second, almost universally known, method of reducing debt is bankruptcy. Consumers who believe they have no other alternatives are usually the ones who should turn to bankruptcy. There are two types of bankruptcy, Chapter 7 and Chapter 13; both can protect some of the client’s assets as well as absolve totally, or at least the majority, of the client’s debt. The more immediate and probably harshest of the drawbacks to bankruptcy is the traumatic damage to the consumer’s credit and depending on the situation can stay on the credit report for 7-10 years. On the contrary, in public records the notice of bankruptcy can show for up to 20 years.
Consolidation loans allow a consumer to pay off their debt in full by obtaining one big loan to cover the consumer’s entire range of debt. With a consolidation loan, monthly payments are no longer a hassle to juggle. Interest rates are relatively lower than what credit cards offer and credit ratings are not affected assuming payments are not missed. However, the discipline required to prevent a consumer from falling into the same amount of debt, if not more, is almost parallel to the amount required to solely pull oneself out of debt through a do-it-yourself program. A secured consolidation loan can cause even more harm by putting the collateral at risk in the case of default. Consolidation loans are handy but for the consumer can be a very tight rope to walk—especially if paying back the consolidation company can take more than a couple years.
A Debt Settlement or Debt Reduction program strives to actually reduce the amount of debt the client owes. A good settlement company should be able to reduce the debt by 50-60% of the principal balance based off the client’s personal financial hardship. After entrance into the program, each client is set up with an account almost exactly the same in function and use as a regular savings account. These funds are later used as support when negotiating with creditors. However, due to the fact that debt settlement requires clients to deposit into a trust account rather than repay outstanding accounts to other creditors, clients will notice a dip in their credit rating. This is considered only a transitory period, as the funds in the account will be used to pay off the creditor with an attractive lump sum payment. As each account is closed and settled, the client’s credit rating should gradually come back on the upswing and be in a prime credit repair position after all debt is paid off. Overall, debt settlement offers a way to reduce a client’s debt by almost half within 2 to 3 years as well as an opportunity to eventually repair their credit. It is important to note that although Debt Settlement has a temporary negative effect to the credit score, your credit report will not show that a third party is helping you pay off the debt.
Bankruptcy Exemptions
Bankruptcy exemptions are laws written by both the state and federal government to ensure that a debtor’s assets are protected in order to ensure a fresh start after filing for bankruptcy. When filing for bankruptcy, debtors are required to fill out quite a few papers. Among these is the Schedule C form. In this form, a debtor will list the property that he is claiming to be exempt.
The laws that govern bankruptcy exemptions are numerous, but a debtor has two options: choose to follow state exemption laws or federal exemption laws. However, only 15 states and Washington D.C. allow a debtor to choose between federal or state exemption laws. These states are: Arkansas, Connecticut, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin.
Defining what kind of property is exempt under federal law
Again, only the 15 states mentioned before and Washington D.C. allow a debtor to use federal exemption laws. Also note that these exemptions can be doubled if a debtor is filing with his spouse.
Real property
Real property, co-op or mobile home up to $16,150.00
Personal Property
Animals, appliances, books, clothing, crops, furnishings, household goods, and musical instruments: up to $425.00 per item, $8,625.00 total.
Vehicles: up to $2,950.00
Jewelry: up to $1,225.00
Tools of trade, i.e. work tools: up to $1,625.00
Health Aides: unlimited
Burial plots: up to $16,500.00
All other property: up to $8,075.00 of
Wages and Pensions, Recoveries and Benefits
Personal Injury Funds: up to $16,500.00
Wages: none
Wrongful Death Funds: only amount needed for continuing support
Lost earnings: unlimited
Retirement Benefits: only amount needed for continuing support
Alimony: only amount needed for continuing support
Unemployment Compensation: unlimited
Veteran’s benefits: unlimited
Crime Victim’s Compensation: unlimited
Social Security and Public Assistance: unlimited
Life and health Insurance
Disability: unlimited
Unemployment compensation: unlimited
Life insurance policy loan and/or dividends or interest: up to $8,625.00
Life insurance proceeds: only amount needed for support
Education Funds
Education funds must be placed in an educational retirement account or a State tuition program at least one year before the bankruptcy filing. However, there are limits established by the Internal Revenue Code.
Which state exemption laws to use:
The rule of thumb is that if you have lived in a state for 730 days (2 years), then use state exemption laws. However, if you have not lived in a single state within the past previous 2 years, use the state where the majority of the 180 day period preceding the 2 year period was spent.
Credit Consolidation or Debt Settlement?
Which is right for you? That depends on many factors, mainly your current and projected financial situation. There are many misconceptions about these two options and in this article I will explain the positives and negatives of each.
Credit Consolidation is to combine outstanding debts into one or several loans. The important thing to remember is that with a consolidation you are not reducing the principal debt amount you owe. In most cases your principal debt will increase at first because of closing costs or transfer fees. A Credit Consolidation can be a good move but only if the new loan is at a lower interest rate than the individual debt items. Over the years I have advised hundreds of clients on how to get out of debt. It seems that initially most people want to consolidate their debts to not only reduce interest but to make their lives easier by making only one payment. I recommend that if you get approved for a consolidation loan to only accept if the interest rate is substantially lower than the loans you are consolidating. It makes no financial sense to consolidate loans to make your life easier. This is especially true if you refinance your mortgage to pay off credit cards. Remember, only consolidate for a lower interest rate and take all closing costs into consideration. Another potentially useful situation to consolidate is if you are struggling with minimum monthly payments. In some cases you can buy yourself some time if you're able to consolidate and have a substantially lower payment, although this will generally prolong the amount of time it takes to actually pay the debt off.
Debt Settlement is also known as Debt Reduction. Debt Settlement is different than Credit Consolidation because the goal is to reduce your principal debt amount. This is done through negotiating with your creditor to lower your debt amount based off your specific financial hardship. If you are not in a hardship the program will not work because the creditors will have no reason to lower your debt amount. What qualifies as a hardship? As always, this depends on your situation. Some people are already behind and can't afford their minimum monthly payments; this is definitely a financial hardship. If you're current but are in danger of falling behind in the near future, you also might qualify for Debt Settlement. Debt Settlement is usually the fastest way to get rid of unsecured debt besides bankruptcy. The main tradeoff is that it's not good for your credit score. If you have decent credit, your payment history will be negatively affected which is enough to pull your credit score down into the "poor" range. In order for Debt Settlement to make sense for you, the benefit of paying off your unsecured debt in less than three years must outweigh the fact that your credit score will be compromised. Once the debt is paid off you can begin to rebuild your credit.
Financial Hardships and Debt Settlement
Debt Settlement as a means of debt relief can be extremely advantageous for consumers struggling with meeting the minimum monthly obligations (payments) on credit cards, unsecured loans and medical bills, etc. As with all things in life one needs to make sure they are pursuing the correct option for their specific needs. When considering using debt settlement as a form of debt relief it is important to make sure you have a legitimate hardship. If you enter into a settlement without a solid hardship you may find that the program is not as beneficial as once originally thought. Creditors will and do accept settlements on a daily basis. Obviously this is not something they are eager to advertise to potential clients as well as the ones they have already attained. It is important to note that Debt Settlement is designed to reduce debts that the client deems valid. Select Debt Relief cannot help if you are disputing the debt or believe that your circumstance and reason for accumulating the debt are unjust. In these cases it is wise to consult the professional advice of an attorney such as www.hurricane-lawyer.com to represent your claim, rather than accepting the damage and or debt with the hopes of negotiating a settlement by employing a Debt Negotiation company. Again, for the settlement to be reached it is imperative to have a legitimate hardship. So, if you have just gone to the local electronics store and purchased the latest and greatest that Silicon Valley has to offer with intentions of entering into a debt settlement program not only could this be considered fraudulent activity, but you may also find that most settlement companies are unwilling to work on your behalf. Considering the staggering amount of unsecured debt in the United States (approx. $943.5 billion) it is very plausible that most clients are being forthcoming and honest about their hardships. The most common question is “Do I have a legitimate hardship?” This question is very ambiguous at best since the creditors make the final decision on whether or not they believe a hardship to be legitimate. Now, with that said there are a few tried and tested hardships that creditors commonly accept. In our experience at Select Debt Relief we find that our clients whom have lost their jobs and have no means of financial support have very good chances of reaching favorable settlements with their creditors. Also, clients experiencing divorce and medical issues which inhibit them from making their payments are highly likely to receive the desired results through debt settlement. Even people who are current on their bills but continually struggle to stay current may find that they also are candidates for a debt settlement program. Finally, we have noticed that our clients who are on a limited fixed income have very good chances of reaching positive settlement results. By no means are these the only legitimate hardships by which a settlement can be reached. Since each debt situation is unique to each client there may be other hardships which will also serve as being valid, therefore helping to reach a settlement with the creditors.
Consumer Advocate
A Consumer Advocate specializing in Debt Collection Practices can be an effective option to help you get through the credit collection process. Consumer Advocates or Unions are set up to act as a layer of protection between you and the creditor/collector once your debts fall behind. Most Consumers Unions were formed by experienced professionals from the Debt Reduction, Credit Counseling, Student Loan, Mortgage, Credit Card, and Collection Industry. These groups were created in response to abusive creditor collection techniques used against clients involved in Debt Relief Programs. Realizing first hand that most clients have little knowledge of their rights and are ill equipped to handle collection harassment, the Consumers Union was designed to help debtors stand up to the creditors. Most Consumer Advocate’s help their clients through a combination of client Education and Protection.
A Consumer Advocate specializing in Debt Collection Practices can be an effective option to help you get through the credit collection process. Consumer Advocates or Unions are set up to act as a layer of protection between you and the creditor/collector once your debts fall behind. Most Consumers Unions were formed by experienced professionals from the Debt Reduction, Credit Counseling, Student Loan, Mortgage, Credit Card, and Collection Industry. These groups were created in response to abusive creditor collection techniques used against clients involved in Debt Relief Programs. Realizing first hand that most clients have little knowledge of their rights and are ill equipped to handle collection harassment, the Consumers Union was designed to help debtors stand up to the creditors. Most Consumer Advocate’s help their clients through a combination of client Education and Protection.
A Consumer Advocate is not only designed to educate but also to protect their members. If you are dealing with a collector who is ignoring the laws which regulate their industry, the Consumers Union should be able to contact the abusive creditor on your behalf. Most unions will provide helpful documentation regarding your rights, a call script for handling collector calls, and calls logs for tracking purposes. In many cases a cease and desist letter will be sent instructing the Debt Collector to cease all communication with the client. If this is ineffective they can help you file a complaint or even refer you to an attorney if need be.
In the Debt Relief industry, the services of a Consumers Union will usually be offered with or as part of a Debt Help program such as Debt Settlement, Debt Reduction, Credit Counseling, Debt Management or Foreclosure Relief. Most of these organizations have in-house customer service departments that can help clients deal with Debt Collectors and the Consumers Union will be utilized in extreme cases of abuse and harassment. For many people the Consumers Union can help relieve a lot of the pressure associated with the inevitable Creditor Collection calls when a debt falls behind.
Choosing the Right Debt Settlement Company
A Google search for "Debt Help" will generate page after page of financial service companies offering different solutions to help you get out of debt. The various "Debt Help" options are generally Debt Settlement, Credit Counseling, Debt Consolidation, and Bankruptcy. In this article I will focus on Debt Settlement and what you can look out for in the consultation process to help you make your decision with confidence.
Most Debt Settlement (also known as Debt Reduction) companies follow a similar process in qualifying and enrolling their clients into the program. I will break this down into 5 steps:
1. Initial Contact: Many customers will find a list of "Debt Help" companies by typing phrases into search engines such as Credit Card Debt, Get out of Debt, or Debt Relief. The initial contact will be initiated by filling out a form or calling the company directly. This first call will give you the most clues on what kind of business you are dealing with. The most important thing to remember is that Debt Settlement does not work for everybody. If a Debt Consultant makes the program sound like everyone gets accepted, you do not want to go with that organization. The only way a company can successfully reduce your debt is if you are in a financial hardship. Basically, if you don't need the help, the program will not work because the creditors will have no reason to lower your debt amounts. If you're current on the bills you still might qualify for debt reduction but only if you are struggling to make the minimum payments. If a Debt Consultant neglects to ask about your state of affairs and pushes you to send in your credit card statements, hang up and call a firm that cares about your specific predicament. An ethical Debt Consultant representing a reputable firm will discuss all the aspects of Debt Settlement, both positive and negative. Remember If it sounds too good to be true, it is. If the initial phone conversation is going well and you have a general understanding of how Debt Settlement works, then it is time to have the company review your credit card/loan statements or a credit report.
2. Submission of Credit Report or Statements: If a company approves you without reviewing your statements, this is a bad sign. Reputable Debt Reduction services will want to review your statements or a credit report to do a comparative analysis. Having the company review your information is part of the approval process and in no way should commit you to anything. This part of the process is crucial because the specific creditors that you are indebted to historically settle at different amounts. The amount by which a creditor will reduce your debt will vary depending on the debt settlement company, financial hardship, creditor collection practices, and credit card delinquency. The job of the Debt Reduction Company is to take everything into account and give you the most accurate quote possible. If you speak with a Debt Relief company and this step is missing, I would not recommend taking the process any further.
3. Underwriting: The underwriting (also known as approval, qualification) process is designed to ensure that only qualified applicants are being approved for the program. This is an extremely important step to a reputable Debt Settlement firm because it's a system intended to help ensure that approved applicants make the transition to satisfied clients with the highest rate of success possible. If a company is letting everyone in the door, chances are many of these clients are getting settlements rejected by their creditors because they are not qualified to have a Debt Reduction.
4. Approval: If you are approved for a Debt Settlement program the consultant will be able to tell you how much your monthly payment is and for roughly how long it will take for you to be debt free. In the field of Debt Settlement the successful programs are usually not more that 3-4 years in length. Every creditor has a window of opportunity when they are willing to accept settlements and the vast majority will be approved within 3 and 42 months. If a company says that they can reduce your debt by fifty percent and offers you a 5 year program, be cautious. In Debt Settlement the creditors will be paid off one at a time and the possibility of legal action from the creditor increases as the debt becomes more delinquent.
5. Agreement: If the approval is within range and you would like to move forward the next step is to look at the agreement. The agreement should clearly state your monthly payment and fee schedule. Make sure to read the entire document and write down any extra questions that come up. You should be able to cancel the Debt Settlement mid-program if needed, without being responsible for future monthly payments. Of course nobody enters a Debt Settlement Program intending to cancel 10 months down the road but if something unexpected happens to your income, you need to be able to sever the relationship. If you read the agreement and it seems the opposite of what your Debt Consultant explained to you, it is not a wise idea to sign up with that company.
Now that you have found the best company for your needs focus on your new monthly payment. If you ever can afford to pay above your minimum monthly, I highly recommend doing so. Remember, the goal is to pay off this debt as fast as possible. Stay in communication with the customer service department and refer communication from your creditors to the Debt Relief Company. Before you know it the debt will be showing $0 balances and you will be on the road to financial freedom. If you ever get discouraged in the program and the anticipated 2-3 years to pay off the debt, just remember the alternative of making minimum monthly payments or the financial position you were in before the program started.
The FDCPA and You
If you are one of the millions of Americans struggling with the knowledge that you have fallen behind on payments made to creditors and are curious if you have protection from creditor harassment the answer is yes. The protection which is granted to each American is spelled out in the Fair Debt Collections Practices Act (FDCPA). This is great news considering that by the end of 2007 the total credit card debt for the United States was approximately $ 943.5 billion. The FDCPA was passed in late 1977 under the administration of President Carter. This law was passed by Congress to curb or limit the action third party collectors could take against debtors. It sent a message to collectors that the abusive tactics collectors were known to use would not be tolerated.
Debts Covered
The general debts included in the FDCPA are mainly in regards to medical debt, credit cards, personal loans, car loans and mortgage loans-1st and 2nd. To get a more in debth list of debts included in the Fair Debt Collection Practices Act please review the act itself which can be found on Federal Trade Commission website. One point that needs to be noted is the FDCPA does not apply to an in house collection agency. There is ambiguity regarding the previous statement due to the fact that if an in house collector misrepresents themselves as a third party collector they may find that they are subject to laws of the FDCPA. Consumers should keep in mind that each state has its own set of collection laws. Most are very similar to the ones in the FDCPA.
Harassment
The most common form of harassment used by third party collectors is repeated phone calls. The calls usually start out friendly in the initial phase, but soon after is when the calls have been known to escalate to not-so-friendly conversations. Many calls have been deemed to be abusive not only by the debtor but in the eyes of the law. It does not stop at phone calls. Most collection companies are known to send repeated letters which also border on or are considered to be abusive in nature. The most disturbing form of harassment comes in the form of threats issued by the collecting party. These tactics serve no purpose for the person owing the debt. The only good use they have is to increase the profits of collection companies. Obviously this is of no benefit to you the consumer. It only creates more stress and despair on the party trying to solve the debt.
Third party collectors are very aware of the FDCPA; some just choose not to adhere to it whereas other collectors tend to operate right on the border of it. Violations of debtors' rights include contacting the debtor after receiving written notice not to do such, threatening harm or violence to the owing party, threats of arrest, taking property, garnishing wages unless there is intent to do so and a legitimate cause for that type of action. It is also a violation of the Fair Debt Collection Practices Act to speak with a third party regarding the owner's debt. This includes relatives, employers, friends and even neighbors. I have seen it happen on numerous occasions where a collector repeatedly calls at the borrower's place of employment-this has and can result in termination for the employee. How could this possibly help either party? Now the debtor is without a sufficient means of financial support and in a worse off position than originally thought and the collector has not received funds on the debt owed. It is also important to understand that once your debt has been transferred to a third party collector the collection company is required to notify you by mail that they are trying to collect on the debt. If the debtor disputes the validity of the debt the collection company must now go back to the original creditor for validation that the debt is actually owed. During this time collection activity is not allowed.
Budgeting Tips
The latest economic growth report for the United States was not the positive beacon of light that most of us wanted to hear. Actually, the report indicated a slowdown. This is no surprise to most in the financial industry since the sluggish growth has been right at our front door for some time now. One of the biggest problems faced by the American consumer is how to manage their bills in a responsible and timely manner while avoiding the pitfalls of falling behind on the debt owed to creditors. This can be an extremely treacherous task to accomplish in today's economy. There are a few contributing factors that most of us deal with on a daily basis which makes it even harder to contend with the debt owed. They are high and ever climbing gas prices, the recent meltdown in the subprime mortgage markets, and more stringent creditor guidelines. Also, mismanagement of funds on the consumers' behalf, in particular spending beyond your means usually leads to financial turmoil. If you are doing this it is probably with the help of a credit card, which usually indicates a debt issue. If any of the examples listed above apply to you then keep on reading to find help with budgeting your resources.
"I need help but do not know where to start. What can I do?" This is one of the most common questions asked of a financial professional.
• First you need to take a good look at your monthly expenses.
• Second, divide monthly expenses into two groups-Fixed and Variable costs. Fixed costs are costs that stay the same and never change whereas variable means your costs change or vary. This is known as organizing your expenses.
• Now let's prioritize the debt. If you are a homeowner the mortgage payment should be on top of your list. Depending on the type of mortgage you have this could fall under fixed or variable costs.
• Third you should focus on debt that has a variable or changing rate. This is usually associated with credit cards and lines of credit- secured or unsecured. As many consumers have found out this is the area that needs extreme attention to detail. Why? Most debt instruments of this form have daily compounding interest which can lead to greater debt and financial stress.
• Lastly, do not forget about retirement. A few ways to accomplish this are to set aside money for the future whether in the form of mutual funds, bonds, stocks or 401(k) plans.
• Now add up all outgoing expenses and subtract them from your monthly income to find out your disposable or discretionary income. If the amount you calculate seems to low and you would like less debt and more disposable income go back and review each of your fixed and variable costs. Take a hard long look at where your money goes and cut back where appropriate. One of the best places to cut back or limit spending is with credit cards. Use this debt wisely and only when absolutely necessary. If you calculation shows you are in the red (more money going out then coming in) you may need to speak with a financial professional to help you regain financial control.
Remember, track all expenses and set up reasonable financial benchmarks to avoid becoming another statistic for debt issuers and buyers.
Debt Settlement and Dealing with Creditors
If you have ever fallen behind on your credit cards you know that dealing with bill collectors can be an extremely frustrating and stressful experience. Government legislation such as the Fair Debt Collection Practices Act has forced the collection industry to clean up its act but many collectors will still say almost anything to get a delinquent account paid. If you are thinking about joining or are already in a Debt Settlement or Debt Reduction program it is important to know how to effectively deal with creditors and collection calls.
The most important thing to understand is that the Debt Collector on the other line is just doing their job. At the end of the day, most collectors are getting paid depending on how much they can bring back in on delinquent accounts. Review the Fair Debt Collection Practices Act (FDCPA) to learn the difference between acceptable means of collection and tactics that are illegal. If you are thinking about joining a Debt Settlement Program it should be comforting to know that there are some effective ways that most companies can help stand between you and the creditors. Debt Settlement and Debt Reduction companies have two different approaches when it comes to handling creditors, proactive and reactive. Although we handle creditor communication on a case by case basis, the Select Debt Relief approach would be considered proactive.
In the world of Debt Negotiation and Creditor communication, proactive means that we don’t wait around and do nothing until our clients start getting creditor calls; we try and address the issue before it even starts. Usually the first communication to the Creditors from our company will be a Cease Communication Letter. These letters are to let the creditor know that we are now the main contact for this account and have a Limited Power of Attorney to represent our client. Basically from this point forward all communication must first go through us. A Cease Communication or Cease and Desist Letter can be an effective means of reducing creditor calls from third party collectors and in some cases original collectors. Because we are now representing the client it is also advantageous to change the phone number and address on file with the creditor to ours. As a third layer of protection we can employ the service of a consumers union such as ACU (American Consumers Union) and UCAN (United Consumer Advocacy Network). The Consumer Unions sole purpose is to represent and advise clients who are getting an unusually high volume of collection calls. Once a client is enrolled in our Debt Reduction Program it is imperative that any communication from the creditor is forwarded directly to our customer service department.
Whether you choose to utilize Debt Settlement or decide to handle the creditors on your own, remember that it is not easy to reduce or make arrangements on a large unsecured debt amount. The process is not painless; it takes patience, determination, and a lot of hard work to get out of debt. Do the best you can to not take creditor calls personally and remember that they are paid to be persistent.
The Fair Debt Collection Practices Act
As amended by Pub. L. 109-351, §§ 801-02, 120 Stat. 1966 (2006)
As a public service, the staff of the Federal Trade Commission (FTC) has
prepared the following complete text of the Fair Debt Collection Practices Act
(FDCPA), 15 U.S.C. §§ 1692-1692p.
Please note that the format of the text differs in minor ways from the U.S.
Code and West’s U.S. Code Annotated. For example, this version uses FDCPA
section numbers in the headings. In addition, the relevant U.S. Code citation is
included with each section heading. Although the staff has made every effort
to transcribe the statutory material accurately, this compendium is intended as
a convenience for the public and not a substitute for the text in the U.S. Code.
Table of Contents
§ 801 Short title
§ 802 Congressional findings and declaration of purpose
§ 803 Definitions
§ 804 Acquisition of location information
§ 805 Communication in connection with debt collection
§ 806 Harassment or abuse
§ 807 False or misleading representations
§ 808 Unfair practices
§ 809 Validation of debts
§ 810 Multiple debts
§ 811 Legal actions by debt collectors
§ 812 Furnishing certain deceptive forms
§ 813 Civil liability
§ 814 Administrative enforcement
§ 815 Reports to Congress by the Commission
§ 816 Relation to State laws
§ 817 Exemption for State regulation
§ 818 Exception for certain bad check enforcement programs operated by
private entities
§ 819 Effective date
§ 801. Short Title
This title may be cited as the “Fair Debt Collection Practices
Act.”
§ 802. Congressional findings and declaration of purpose
(a) There is abundant evidence of the use of abusive, deceptive,
and unfair debt collection practices by many debt
collectors. Abusive debt collection practices contribute to
the number of personal bankruptcies, to marital instability,
to the loss of jobs, and to invasions of individual privacy.
(b) Existing laws and procedures for redressing these injuries
are inadequate to protect consumers.
(c) Means other than misrepresentation or other abusive debt
collection practices are available for the effective collection
of debts.
(d) Abusive debt collection practices are carried on to a substantial
extent in interstate commerce and through means
and instrumentalities of such commerce. Even where
abusive debt collection practices are purely intrastate in
character, they nevertheless directly affect interstate commerce.
(e) It is the purpose of this title to eliminate abusive debt collection
practices by debt collectors, to insure that those
debt collectors who refrain from using abusive debt collection
practices are not competitively disadvantaged, and
to promote consistent State action to protect consumers
against debt collection abuses.
§ 803. Definitions
As used in this title—
(1) The term “Commission” means the Federal Trade
Commission.
(2) The term “communication” means the conveying of
information regarding a debt directly or indirectly to
any person through any medium.
(3) The term “consumer” means any natural person obligated
or allegedly obligated to pay any debt.
(4) The term “creditor” means any person who offers or
extends credit creating a debt or to whom a debt is
owed, but such term does not include any person to the
extent that he receives an assignment or transfer of a
debt in default solely for the purpose of facilitating collection
of such debt for another.
(5) The term “debt” means any obligation or alleged
obligation of a consumer to pay money arising out of
a transaction in which the money, property, insurance
or services which are the subject of the transaction are
primarily for personal, family, or household purposes,
whether or not such obligation has been reduced to
judgment.
(6) The term “debt collector” means any person who uses
any instrumentality of interstate commerce or the mails
in any business the principal purpose of which is the
collection of any debts, or who regularly collects or
attempts to collect, directly or indirectly, debts owed
or due or asserted to be owed or due another. Notwithstanding
the exclusion provided by clause (F) of
the last sentence of this paragraph, the term includes
any creditor who, in the process of collecting his own
debts, uses any name other than his own which would
indicate that a third person is collecting or attempting
to collect such debts. For the purpose of section
808(6), such term also includes any person who uses
any instrumentality of interstate commerce or the mails
in any business the principal purpose of which is the
enforcement of security interests. The term does not
include—
(A) any officer or employee of a creditor while, in
the name of the creditor, collecting debts for such
creditor;
(B) any person while acting as a debt collector for
another person, both of whom are related by common
ownership or affiliated by corporate control,
if the person acting as a debt collector does so only
for persons to whom it is so related or affiliated and
if the principal business of such person is not the
collection of debts;
(C) any officer or employee of the United States or any
State to the extent that collecting or attempting to
collect any debt is in the performance of his official
duties;
(D) any person while serving or attempting to serve legal
process on any other person in connection with
the judicial enforcement of any debt;
(E) any nonprofit organization which, at the request
of consumers, performs bona fide consumer credit
counseling and assists consumers in the liquidation
of their debts by receiving payments from such
consumers and distributing such amounts to creditors;
and
(F) any person collecting or attempting to collect any
debt owed or due or asserted to be owed or due
another to the extent such activity
(i) is incidental to a bona fide fiduciary obligation
or a bona fide escrow arrangement;
(ii) concerns a debt which was originated by such
person;
(iii) concerns a debt which was not in default at the
time it was obtained by such person; or
(iv) concerns a debt obtained by such person as a
secured party in a commercial credit transaction
involving the creditor.
(7) The term “location information” means a consumer’s
place of abode and his telephone number at such place,
or his place of employment.
(8) The term “State” means any State, territory, or possession
of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, or any political subdivision
of any of the foregoing.
§ 804. Acquisition of location information
Any debt collector communicating with any person other
than the consumer for the purpose of acquiring location information
about the consumer shall—
(1) identify himself, state that he is confirming or correcting
location information concerning the consumer, and,
only if expressly requested, identify his employer;
(2) not state that such consumer owes any debt;
(3) not communicate with any such person more than once
unless requested to do so by such person or unless
the debt collector reasonably believes that the earlier
response of such person is erroneous or incomplete and
that such person now has correct or complete location
information;
(4) not communicate by post card;
(5) not use any language or symbol on any envelope or
in the contents of any communication effected by the
mails or telegram that indicates that the debt collector
is in the debt collection business or that the communication
relates to the collection of a debt; and
(6) after the debt collector knows the consumer is represented
by an attorney with regard to the subject debt
and has knowledge of, or can readily ascertain, such
attorney’s name and address, not communicate with
any person other than that attorney, unless the attorney
fails to respond within a reasonable period of time to
the communication from the debt collector.
§ 805. Communication in connection with debt collection
(a) COMMUNICATION WITH THE CONSUMER GENERALLY.
Without the prior consent of the consumer given
directly to the debt collector or the express permission of
a court of competent jurisdiction, a debt collector may not
communicate with a consumer in connection with the collection
of any debt—
(1) at any unusual time or place or a time or place known
or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances
to the contrary, a debt collector shall assume that the
convenient time for communicating with a consumer
is after 8 o’clock antimeridian and before 9 o’clock
postmeridian, local time at the consumer’s location;
(2) if the debt collector knows the consumer is represented
by an attorney with respect to such debt and has knowledge
of, or can readily ascertain, such attorney’s name
and address, unless the attorney fails to respond within
a reasonable period of time to a communication from
the debt collector 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.
(b) COMMUNICATION WITH THIRD PARTIES. Except as
provided in section 804, without the prior consent of the
consumer given directly to the debt collector, or the express
permission of a court of competent jurisdiction, or as
reasonably necessary to effectuate a postjudgment judicial
remedy, a debt collector may not communicate, in connection
with the collection of any debt, with any person other
than a consumer, his attorney, a consumer reporting agency
if otherwise permitted by law, the creditor, the attorney of
the creditor, or the attorney of the debt collector.
(c) CEASING COMMUNICATION. If a consumer notifies a
debt collector in writing that the consumer refuses to pay a
debt or that the consumer wishes the debt collector to cease
further communication with the consumer, the debt collector
shall not communicate further with the consumer with
respect to such debt, except—
(1) to advise the consumer that the debt collector’s further
efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor
may invoke specified remedies which are ordinarily
invoked by such debt collector or creditor; or (3) where applicable, to notify the consumer that the debt
collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail, notification
shall be complete upon receipt.
(d) For the purpose of this section, the term “consumer” includes
the consumer’s spouse, parent (if the consumer is a
minor), guardian, executor, or administrator.
§ 806. Harassment or abuse
A debt collector may not engage in any conduct the natural
consequence of which is to harass, oppress, or abuse any
person in connection with the collection of a debt. Without
limiting the general application of the foregoing, the following
conduct is a violation of this section:
(1) The use or threat of use of violence or other criminal
means to harm the physical person, reputation, or property
of any person.
(2) The use of obscene or profane language or language
the natural consequence of which is to abuse the hearer
or reader.
(3) The publication of a list of consumers who allegedly
refuse to pay debts, except to a consumer reporting
agency or to persons meeting the requirements of section
603(f) or 604(3) of this Act.
(4) The advertisement for sale of any debt to coerce payment
of the debt.
(5) Causing a telephone to ring or engaging any person
in telephone conversation repeatedly or continuously
with intent to annoy, abuse, or harass any person at the
called number.
(6) Except as provided in section 804, the placement of
telephone calls without meaningful disclosure of the
caller’s identity.
§ 807. False or misleading representations
A debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection
of any debt. Without limiting the general application
of the foregoing, the following conduct is a violation of this
section:
(1) The false representation or implication that the debt
collector is vouched for, bonded by, or affiliated with
the United States or any State, including the use of any
badge, uniform, or facsimile thereof.
(2) The false representation of—
(A) the character, amount, or legal status of any debt; or
(B) any services rendered or compensation which may
be lawfully received by any debt collector for the
collection of a debt.
(3) The false representation or implication that any individual
is an attorney or that any communication is from
an attorney.
(4) The representation or implication that nonpayment of
any debt will result in the arrest or imprisonment of
any person or the seizure, garnishment, attachment,
or sale of any property or wages of any person unless
such action is lawful and the debt collector or creditor
intends to take such action.
(5) The threat to take any action that cannot legally be
taken or that is not intended to be taken.
(6) The false representation or implication that a sale,
referral, or other transfer of any interest in a debt shall
cause the consumer to—
(A) lose any claim or defense to payment of the debt;
or
(B) become subject to any practice prohibited by this
title.
(7) The false representation or implication that the consumer
committed any crime or other conduct in order
to disgrace the consumer.
(8) Communicating or threatening to communicate to any
person credit information which is known or which
should be known to be false, including the failure to
communicate that a disputed debt is disputed.
(9) The use or distribution of any written communication
which simulates or is falsely represented to be a document
authorized, issued, or approved by any court,
official, or agency of the United States or any State, or
which creates a false impression as to its source, authorization,
or approval.
(10) The use of any false representation or deceptive means
to collect or attempt to collect any debt or to obtain
information concerning a consumer.
(11) The failure to disclose in the initial written communication
with the consumer and, in addition, if the initial
communication with the consumer is oral, in that initial
oral communication, that the debt collector is attempting
to collect a debt and that any information obtained
will be used for that purpose, and the failure to disclose
in subsequent communications that the communication
is from a debt collector, except that this paragraph shall
not apply to a formal pleading made in connection with
a legal action.
(12) The false representation or implication that accounts
have been turned over to innocent purchasers for value.
(13) The false representation or implication that documents
are legal process.
(14) The use of any business, company, or organization
name other than the true name of the debt collector’s
business, company, or organization.
(15) The false representation or implication that documents
are not legal process forms or do not require action by
the consumer.
(16) The false representation or implication that a debt collector
operates or is employed by a consumer reporting
agency as defined by section 603(f) of this Act.
§ 808. Unfair practices
A debt collector may not use unfair or unconscionable
means to collect or attempt to collect any debt. Without limiting
the general application of the foregoing, the following
conduct is a violation of this section:
(1) The collection of any amount (including any interest,
fee, charge, or expense incidental to the principal obligation)
unless such amount is expressly authorized by
the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person of
a check or other payment instrument postdated by more
than five days unless such person is notified in writing
of the debt collector’s intent to deposit such check or
instrument not more than ten nor less than three business
days prior to such deposit.
(3) The solicitation by a debt collector of any postdated
check or other postdated payment instrument for the
purpose of threatening or instituting criminal prosecution.
(4) Depositing or threatening to deposit any postdated
check or other postdated payment instrument prior to
the date on such check or instrument.
(5) Causing charges to be made to any person for communications
by concealment of the true propose of
the communication. Such charges include, but are not
limited to, collect telephone calls and telegram fees.
(6) Taking or threatening to take any nonjudicial action to
effect dispossession or disablement of property if—
(A) there is no present right to possession of the property
claimed as collateral through an enforceable
security interest;
(B) there is no present intention to take possession of
the property; or
(C) the property is exempt by law from such dispossession
or disablement.
(7) Communicating with a consumer regarding a debt by
post card.
(8) Using any language or symbol, other than the debt collector’s
address, on any envelope when communicating
with a consumer by use of the mails or by telegram,
except that a debt collector may use his business name
if such name does not indicate that he is in the debt collection
business.
§ 809. Validation of debts
(a) Within five days after the initial communication with a
consumer in connection with the collection of any debt,
a debt collector shall, unless the following information is
contained in the initial communication or the consumer has
paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days
after receipt of the notice, disputes the validity of the
debt, or any portion thereof, the debt will be assumed
to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector
in writing within the thirty-day period that the
debt, or any portion thereof, is disputed, the debt collector
will obtain verification of the debt or a copy of
a judgment against the consumer and a copy of such
verification or judgment will be mailed to the consumer
by the debt collector; and
(5) a statement that, upon the consumer’s written request
within the thirty-day period, the debt collector will
provide the consumer with the name and address of the
original creditor, if different from the current creditor.
(b) If the consumer notifies the debt collector in writing within
the thirty-day period described in subsection (a) that the
debt, or any portion thereof, is disputed, or that the consumer
requests the name and address of the original credi- tor, the debt collector shall cease collection of the debt,
or any disputed portion thereof, until the debt collector
obtains verification of the debt or any copy of a judgment,
or the name and address of the original creditor, and a copy
of such verification or judgment, or name and address of
the original creditor, is mailed to the consumer by the debt
collector. Collection activities and communications that
do not otherwise violate this title may continue during
the 30-day period referred to in subsection (a) unless the
consumer has notified the debt collector in writing that the
debt, or any portion of the debt, is disputed or that the consumer
requests the name and address of the original creditor.
Any collection activities and communication during the
30-day period may not overshadow or be inconsistent with
the disclosure of the consumer’s right to dispute the debt or
request the name and address of the original creditor.
(c) The failure of a consumer to dispute the validity of a debt
under this section may not be construed by any court as an
admission of liability by the consumer.
(d) A communication in the form of a formal pleading in a
civil action shall not be treated as an initial communication
for purposes of subsection (a).
(e) The sending or delivery of any form or notice which
does not relate to the collection of a debt and is expressly
required by the Internal Revenue Code of 1986, title V of
Gramm-Leach-Bliley Act, or any provision of Federal or
State law relating to notice of data security breach or privacy,
or any regulation prescribed under any such provision
of law, shall not be treated as an initial communication in
connection with debt collection for purposes of this section.
§ 810. Multiple debts
If any consumer owes multiple debts and makes any single
payment to any debt collector with respect to such debts, such
debt collector may not apply such payment to any debt which
is disputed by the consumer and, where applicable, shall apply
such payment in accordance with the consumer’s directions.
§ 811. Legal actions by debt collectors
(a) Any debt collector who brings any legal action on a debt
against any consumer shall—
(1) in the case of an action to enforce an interest in real
property securing the consumer’s obligation, bring
such action only in a judicial district or similar legal
entity in which such real property is located; or
(2) in the case of an action not described in paragraph (1),
bring such action only in the judicial district or similar
legal entity—
(A) in which such consumer signed the contract sued
upon; or
(B) in which such consumer resides at the commencement
of the action.
(b) Nothing in this title shall be construed to authorize the
bringing of legal actions by debt collectors.
§ 812. Furnishing certain deceptive forms
(a) It is unlawful to design, compile, and furnish any form
knowing that such form would be used to create the false
belief in a consumer that a person other than the creditor
of such consumer is participating in the collection of or in
an attempt to collect a debt such consumer allegedly owes
such creditor, when in fact such person is not so participating.
(b) Any person who violates this section shall be liable to the
same extent and in the same manner as a debt collector is
liable under section 813 for failure to comply with a provision
of this title.
§ 813. Civil liability
(a) Except as otherwise provided by this section, any debt collector
who fails to comply with any provision of this title
with respect to any person is liable to such person in an
amount equal to the sum of— § 813 15 USC 1692k
(1) any actual damage sustained by such person as a result
of such failure;
(2) (A) in the case of any action by an individual, such
additional damages as the court may allow, but not
exceeding $1,000; or
(B) in the case of a class action,
(i) such amount for each named plaintiff as could
be recovered under subparagraph (A), and
(ii) such amount as the court may allow for all
other class members, without regard to a minimum
individual recovery, not to exceed the
lesser of $500,000 or 1 per centum of the net
worth of the debt collector; and
(3) in the case of any successful action to enforce the
foregoing liability, the costs of the action, together with
a reasonable attorney’s fee as determined by the court.
On a finding by the court that an action under this
section was brought in bad faith and for the purpose
of harassment, the court may award to the defendant
attorney’s fees reasonable in relation to the work expended
and costs.
(b) In determining the amount of liability in any action under
subsection (a), the court shall consider, among other
relevant factors—
(1) in any individual action under subsection (a)(2)(A),
the frequency and persistence of noncompliance by the
debt collector, the nature of such noncompliance, and
the extent to which such noncompliance was intentional;
or
(2) in any class action under subsection (a)(2)(B), the
frequency and persistence of noncompliance by the
debt collector, the nature of such noncompliance, the
resources of the debt collector, the number of persons
adversely affected, and the extent to which the debt
collector’s noncompliance was intentional.
(c) A debt collector may not be held liable in any action
brought under this title if the debt collector shows by a
preponderance of evidence that the violation was not intentional
and resulted from a bona fide error notwithstanding
the maintenance of procedures reasonably adapted to avoid
any such error.
(d) An action to enforce any liability created by this title may
be brought in any appropriate United States district court
without regard to the amount in controversy, or in any
other court of competent jurisdiction, within one year from
the date on which the violation occurs.
(e) No provision of this section imposing any liability shall
apply to any act done or omitted in good faith in conformity
with any advisory opinion of the Commission, notwithstanding
that after such act or omission has occurred, such
opinion is amended, rescinded, or determined by judicial
or other authority to be invalid for any reason.
§ 814. Administrative enforcement
(a) Compliance with this title shall be enforced by the Commission,
except to the extent that enforcement of the
requirements imposed under this title is specifically committed
to another agency under subsection (b). For purpose
of the exercise by the Commission of its functions and
powers under the Federal Trade Commission Act, a violation
of this title shall be deemed an unfair or deceptive act
or practice in violation of that Act. All of the functions and
powers of the Commission under the Federal Trade Commission
Act are available to the Commission to enforce
compliance by any person with this title, irrespective of
whether that person is engaged in commerce or meets any
other jurisdictional tests in the Federal Trade Commission
Act, including the power to enforce the provisions of this
title in the same manner as if the violation had been a violation
of a Federal Trade Commission trade regulation rule.
(b) Compliance with any requirements imposed under this title
shall be enforced under—
(1) section 8 of the Federal Deposit Insurance Act, in the
case of—
(A) national banks, by the Comptroller of the Currency;
(B) member banks of the Federal Reserve System
(other than national banks), by the Federal Reserve
Board; and
(C) banks the deposits or accounts of which are insured
by the Federal Deposit Insurance Corporation
(other than members of the Federal Reserve
System), by the Board of Directors of the Federal
Deposit Insurance Corporation;
(2) section 5(d) of the Home Owners Loan Act of 1933,
section 407 of the National Housing Act, and sections
6(i) and 17 of the Federal Home Loan Bank Act, by the
Federal Home Loan Bank Board (acting directing or
through the Federal Savings and Loan Insurance Corporation),
in the case of any institution subject to any
of those provisions;
(3) the Federal Credit Union Act, by the Administrator of
the National Credit Union Administration with respect
to any Federal credit union;
(4) subtitle IV of Title 49, by the Interstate Commerce
Commission with respect to any common carrier subject
to such subtitle;
(5) the Federal Aviation Act of 1958, by the Secretary of
Transportation with respect to any air carrier or any
foreign air carrier subject to that Act; and
(6) the Packers and Stockyards Act, 1921 (except as provided
in section 406 of that Act), by the Secretary of
Agriculture with respect to any activities subject to that
Act.
(c) For the purpose of the exercise by any agency referred
to in subsection (b) of its powers under any Act referred
to in that subsection, a violation of any requirement imposed
under this title shall be deemed to be a violation of
a requirement imposed under that Act. In addition to its powers under any provision of law specifically referred to
in subsection (b), each of the agencies referred to in that
subsection may exercise, for the purpose of enforcing compliance
with any requirement imposed under this title any
other authority conferred on it by law, except as provided
in subsection (d).
(d) Neither the Commission nor any other agency referred to
in subsection (b) may promulgate trade regulation rules or
other regulations with respect to the collection of debts by
debt collectors as defined in this title.
§ 815. Reports to Congress by the Commission
(a) Not later than one year after the effective date of this title
and at one-year intervals thereafter, the Commission shall
make reports to the Congress concerning the administration
of its functions under this title, including such recommendations
as the Commission deems necessary or appropriate.
In addition, each report of the Commission shall
include its assessment of the extent to which compliance
with this title is being achieved and a summary of the enforcement
actions taken by the Commission under section
814 of this title.
(b) In the exercise of its functions under this title, the Commission
may obtain upon request the views of any other
Federal agency which exercises enforcement functions
under section 814 of this title.
§ 816. Relation to State laws
This title does not annul, alter, or affect, or exempt any
person subject to the provisions of this title from complying
with the laws of any State with respect to debt collection
practices, except to the extent that those laws are inconsistent
with any provision of this title, and then only to the extent of
the inconsistency. For purposes of this section, a State law is
not inconsistent with this title if the protection such law affords
any consumer is greater than the protection provided by
this title.
§ 817. Exemption for State regulation
The Commission shall by regulation exempt from the
requirements of this title any class of debt collection practices
within any State if the Commission determines that under the
law of that State that class of debt collection practices is subject
to requirements substantially similar to those imposed by
this title, and that there is adequate provision for enforcement.
§ 818. Exception for certain bad check enforcement programs
operated by private entities
(a) In General.—
(1) TREATMENT OF CERTAIN PRIVATE ENTITIES.—
Subject to paragraph (2), a private entity shall be
excluded from the definition of a debt collector, pursuant
to the exception provided in section 803(6), with
respect to the operation by the entity of a program described
in paragraph (2)(A) under a contract described
in paragraph (2)(B).
(2) CONDITIONS OF APPLICABILITY.—Paragraph (1)
shall apply if—
(A) a State or district attorney establishes, within the
jurisdiction of such State or district attorney and
with respect to alleged bad check violations that do
not involve a check described in subsection (b), a
pretrial diversion program for alleged bad check
offenders who agree to participate voluntarily in
such program to avoid criminal prosecution;
(B) a private entity, that is subject to an administrative
support services contract with a State or district
attorney and operates under the direction, supervision,
and control of such State or district attorney,
operates the pretrial diversion program described in
subparagraph (A); and
(C) in the course of performing duties delegated to it by
a State or district attorney under the contract, the
private entity referred to in subparagraph (B)—
complies with the penal laws of the State;
(ii) conforms with the terms of the contract and
directives of the State or district attorney;
(iii) does not exercise independent prosecutorial
(i) discretion;
(iv) contacts any alleged offender referred to in
subparagraph (A) for purposes of participating
in a program referred to in such paragraph—
(I) only as a result of any determination by
the State or district attorney that probable
cause of a bad check violation under State
penal law exists, and that contact with the
alleged offender for purposes of participation
in the program is appropriate; and
(II) the alleged offender has failed to pay the
bad check after demand for payment, pursuant
to State law, is made for payment of
the check amount;
(v) includes as part of an initial written communication
with an alleged offender a clear and
conspicuous statement that—
(I) the alleged offender may dispute the validity
of any alleged bad check violation;
(II) where the alleged offender knows, or has
reasonable cause to believe, that the alleged
bad check violation is the result of
theft or forgery of the check, identity theft,
or other fraud that is not the result of the
conduct of the alleged offender, the alleged
offender may file a crime report with the
appropriate law enforcement agency; and
(III) if the alleged offender notifies the private
entity or the district attorney in writing, not
later than 30 days after being contacted for
the first time pursuant to clause (iv), that
there is a dispute pursuant to this subsection,
before further restitution efforts are pursued, the district attorney or an employee
of the district attorney authorized
to make such a determination makes a
determination that there is probable cause
to believe that a crime has been committed;
and (vi) charges only fees in connection with services
under the contract that have been authorized by
the contract with the State or district attorney.
(b) Certain Checks Excluded.—A check is described in this
subsection if the check involves, or is subsequently found
to involve—
(1) a postdated check presented in connection with a payday
loan, or other similar transaction, where the payee
of the check knew that the issuer had insufficient funds
at the time the check was made, drawn, or delivered;
(2) a stop payment order where the issuer acted in good
faith and with reasonable cause in stopping payment on
the check;
(3) a check dishonored because of an adjustment to the
issuer’s account by the financial institution holding
such account without providing notice to the person at
the time the check was made, drawn, or delivered;
(4) a check for partial payment of a debt where the payee
had previously accepted partial payment for such debt;
(5) a check issued by a person who was not competent, or
was not of legal age, to enter into a legal contractual
obligation at the time the check was made, drawn, or
delivered; or
(6) a check issued to pay an obligation arising from a
transaction that was illegal in the jurisdiction of the
State or district attorney at the time the check was
made, drawn, or delivered.
(c) Definitions.—For purposes of this section, the following
definitions shall apply:
(1) STATE OR DISTRICT ATTORNEY.—The term “State
or district attorney” means the chief elected or appointed
prosecuting attorney in a district, county (as
defined in section 2 of title 1, United States Code), municipality,
or comparable jurisdiction, including State
attorneys general who act as chief elected or appointed
prosecuting attorneys in a district, county (as so defined),
municipality or comparable jurisdiction, who
may be referred to by a variety of titles such as district
attorneys, prosecuting attorneys, commonwealth’s
attorneys, solicitors, county attorneys, and state’s attorneys,
and who are responsible for the prosecution of
State crimes and violations of jurisdiction-specific local
ordinances.
(2) CHECK.—The term “check” has the same meaning
as in section 3(6) of the Check Clearing for the 21st
Century Act.
(3) BAD CHECK VIOLATION.—The term “bad check
violation” means a violation of the applicable State
criminal law relating to the writing of dishonored
checks.
§ 819. Effective date
This title takes effect upon the expiration of six months
after the date of its enactment, but section 809 shall apply only
with respect to debts for which the initial attempt to collect occurs
after such effective date.
Legislative History
House Report: No. 95-131 (Comm. on Banking, Finance, and Urban Affairs)
Senate Report: No. 95-382 (Comm. on Banking, Housing and Urban Affairs)
Congressional Record, Vol. 123 (1977)
April 4, House considered and passed H.R. 5294.
Aug. 5, Senate considered and passed amended version of
H.R. 5294.
Sept. 8, House considered and passed Senate version.
Enactment: Public Law 95-109 (Sept. 20, 1977)
Amendments: Public Law Nos.
99-361 (July 9, 1986)
104-208 (Sept. 30, 1996)
109-351 (Oct. 13, 2006)