Debt Collection

Debt Collection

Last updated: June 2011

Debtors' Rights: Fair Debt Collection (Fact Sheet)

Statutes
Fair Debt Collection Practices Act
          Who Is Covered
          What Transactions Are Covered
          Validation of Debt Notice
          If Debt if Disputed
          Purpose Statement
Prohibited Acts
          Prohibited Contacts with the Consumer 
          Prohibited Contacts with Other Persons
          Prohibited Harassment or Abuse
          Prohibited False or Misleading Statements
          Prohibited Unfair Practices
The Consumer’s Options and Remedies
          What the Consumer Should Do
          Remedies in Court
Exemption Rights
Post-Judgment Collections
          Judgments as Liens On Real Estate
          Citations to Discover Assets
Wage Garnishments
          Wage Deductions in General 
          Non-Wage Garnishment in General

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Statutes & Other Laws

Fair Debt Collection Practices Act (FDCPA), 15 USC § 1692 et seq.

Illinois Collection Agencies Act, 225 ILCS 425/1 et seq.

Exemption of Personal Property, 735 ILCS 5/12 - 1001 et seq.

Maximum Wages Subject to Collection, 735 ILCS 5/12 - 803 et seq.

Lien of Judgment,735 ILCS 5/12 – 101 et seq.

Exemption of Homestead, 735 ILCS 5/12 – 901 et seq.

Supplementary Proceedings, 735 ILCS 5/12 – 1402 et seq.

Wage Deductions, 735 ILCS 5/12 – 801 et seq.

Non-Wages Garnishments, 735 ILCS 5/12 – 701 et seq.

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Fair Debt Collection Practices Act (“FDCPA”)

Who is covered by the FDCPA?

The Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., regulates the actions of both collection agencies and collection attorneys.

The FDCPA does not govern the conduct of individuals, businesses, or services that are engaged in collecting their own debts. 15 U.S.C. § 1692a(6). 

One exception: creditors who use a name other than their own in collecting a debt (e.g., Acme Hardware uses the name “Jim’s Collection Agency” to collect its own debts) are covered by the FDCPA. 15 U.S.C. § 1692a(6). 

Otherwise, if the creditor is attempting to collect its own debt, the consumer may have to resort to a claim against the creditor in tort, e.g., intentional infliction of emotional distress, abuse of process, or for an unfair practice under the Illinois Consumer Fraud Act, 815 ILCS 505/2.

Collection agencies and collection lawyers are strictly regulated by the FDCPA. The definition of a collector includes attorneys who regularly collect or attempt to collect consumer debts for clients. Heintz v. Jenkins, 514 U.S. 291 (1995). It also includes businesses that operate to collect debts of other businesses, or who purchase defaulted debts from other businesses. Schlosser v. Fairbanks Capital Corp., 323 F.3d 534 (7th Cir. 2003).

What transactions are covered by the FDCPA?

The FDCPA covers debts arising out of transactions that are primarily for personal, family or household purposes, whether or not they have been reduced to judgment. 15 U.S.C. § 1692a(5). Business or commercial debts do not fall within the protections of the FDCPA.

Examples

Medical bills are covered. Bingham v. Collection Bureau, Inc., 505 F. Supp. 864 (D. N.D. 1981).

Rental debt is covered. Emanuel v. American Credit Exchange, 870 F.2d 805 (2d Cir. 1989). 

Student loans are covered, Juras v. Aman Collection Service, Inc., 829 F.2d 739 (9th Cir. 1987).

Credit card debt is covered, Challen v. Town & Country Charge, 545 F. Supp. 1014 (N.D. Ill. 1982). 

Insurance bills are covered, Hamilton v. United Healthcare of Louisiana, Inc., 310 F.3d 385 (5th Cir. 2002).

Utility bills are covered, Piper v. Portnoff Law Assoc., 262 F. Supp. 2d 520 (E.D. Pa. 2003).

On the other hand, car accident debts, taxes (Mortland v. I.R.S., 2003 WL 21791249 (W.D. Tex. 2003)) and child support debt (Mabe v. G.C. Services Limited Partnership, 32 F.3d 86 (4th Cir. 1994)) may not fall under the FDCPA definition of “debt.” See FTC Official Staff Commentary §803(5) and Paskowitz, FTC Informal Staff Letter (July 18, 1990).

Validation of Debt Notice - 15 U.S.C. § 1692g(a)

The collector must send to the consumer in writing, a certain notice, within 5 days of its first contact with the consumer. This notice must provide the following information (“validation notice”):

  • The amount of money owed;
  • The name of the creditor to whom the debt is owed;
  • A statement that if the consumer does not dispute the debt within 30 days, the debt will be assumed to be valid (But this does not prevent the debtor from later disputing the debt);
  • A statement that if the consumer notifies the debt collector in writing within 30 days 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 mail a copy of such verification or judgment to the consumer;
  • A statement that, upon the consumer’s written request within 30 days, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

The validation notice must be conspicuous and cannot be overshadowed by the content of the dunning letter. In Swanson v. Southern Oregon Credit Service, 869 F.2d 1222 (9th Cir. 1988), the Court ruled a validation notice that was written in print much smaller than the text of the dunning letter did not effectively convey the rights of the debtor under the FDCPA.

If Debt Is Disputed - 15 U.S.C. § 1692g(b)

If, within the 30 day period specified in the validation notice, the consumer disputes the debt in writing, or any part of it, or requests the name and address of the original creditor, then the collector must stop collection of the debt, or any disputed portion of it. It cannot resume collection until it obtains verification of the debt or a copy of a court judgment and mails those things and/or mail the name and address to the consumer. The failure of the debtor to dispute the debt within this 30 day period may not be construed as an admission of liability. 15 U.S.C. § 1692g(c).

Purpose Statement - 15 U.S.C. § 1692e(11)

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 with the consumer, the debt collector must include the following statement: 

"This is an attempt to collect a debt and any information obtained will be used for that purpose."

This statement often appears at the bottom of the document. If it is not included, the collector is breaking the law. However, this warning is not required to be included in formal pleading made in connection with a legal action.

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Prohibited Acts

Prohibited Contacts with the Consumer - 15 U.S.C. § 1692c(a)

Unless the consumer or a court has given permission, the debt collector cannot contact or communicate with the consumer (or the consumer’s spouse, parent or guardian), as follows:

  • At unusual or inconvenient places or times (before 8:00 a.m. or after 9:00 p.m.)
  • If they know that the consumer is represented by an attorney
  • At work, if the collector knows or has reason to know that the employer prohibits such calls
  • If the consumer notifies the collector in writing to stop communication or that he or she refuses to pay

Note: If the consumer writes such a letter, the creditor can use other methods to collect the debt, such as filing a lawsuit. Also, the collector can tell the consumer what the creditor intends to do in order to collect. The collector is permitted to continue communications with the debtor's attorney. Tinsely v. Integrity Financial Partners, Inc. 634 F.3d 416 (7th Cir. 2011).

Prohibited Contacts with Other Persons - 15 U.S.C. § 1692c(b)

Unless the consumer or a court has given permission, a collector cannot contact or communicate with anyone about the consumer or the debt, as follows:

  • The collector can contact others to find out where the consumer is or to enforce a court judgment against the consumer, but not for any other reason;
  • A collector cannot tell anyone – including the consumer’s employer, that the consumer owes any debt;
  • A collector cannot contact other persons without identifying him or herself and, if requested, identifying his or her employer;
  • A collector cannot send to any other person a postcard or use any language or symbol on an envelope that shows they are engaged in debt collection;
  • A collector cannot contact another person more than once to find out the debtor’s location, unless requested to do so by that person or unless the collector reasonably believes that what the person said earlier is wrong or incomplete and that the person now knows where the consumer is;
  • A collector cannot contact anyone to try to find the consumer after learning that the consumer is represented by an attorney.

Note: In Hartman v. Meridian Financial Services, Inc., 191 F. Supp. 2d 1031 (W.D. Wis. 2002) the court ruled unlawful the collector’s communications with the debtor after the collector was notified that an attorney represented the debtor. In West v. Costen, 558 F. Supp. 564 (D.C. Va. 1983) the court ruled a collector who had discussed a debt with the uncle of a debtor had violated the FDCPA. However, the collector is permitted to continue communications with the debtor's attorney. Tinsely v. Integrity Financial Partners, Inc. 634 F.3d 416 (7th Cir. 2011).

Prohibited Harassment or Abuse - 15 U.S.C. § 1692d

A collector cannot harass or abuse the consumer. Some examples of harassment or abuse which are forbidden include the following:

  • Using or threatening to use violence or other criminal means to harm the consumer, or the consumer's reputation or property
  • Using obscene, profane or abusive language
  • Publishing a list of consumers who refuse to pay debts, or advertising the debt in any way
  • Causing the phone to ring repeatedly or other annoying, abusive or harassing behavior over the telephone, or calling the consumer without identifying him or herself

Note: In Bingham v. Collection Bureau, Inc., 505 F. Supp. 864 (D.C.N.D. 1981), the court ruled a statement that a debtor “shouldn’t have children if she couldn’t afford them” to be abusive.

Prohibited False or Misleading Statements - 15 U.S.C. § 1692e

Debt Collectors are forbidden to make false or misleading statements in any oral or written communication with the debtor. Examples of statements which may be false or misleading include:

  • Saying that they are associated with the government in some way, or in any other way misrepresenting who they are; it is illegal to make their documents look like court papers or look like any other official documents in order to scare the consumer;
  • Giving false or misleading information about the nature of the debt, or its amount, or its legal status; for example, they cannot tell the consumer that they have a court judgment against the consumer when they do not;
  • Telling the consumer that the consumer will owe the collector money for collection services; "service charges" or other such fees are illegal;
  • Stating or implying that any of their communications are from an attorney when they are not;
  • Falsely stating that the consumer can be arrested or put in jail; a debtor cannot be jailed for failing to pay a debt, unless the consumer is found in contempt of court for willfully not complying with a previous court order to pay; a judge will usually not find someone in contempt of court when the debtor is financially unable to pay the debt;
  • Threatening to do anything that legally cannot be done or that is not intended to be done; for example, they cannot say that the consumer’s property or wages can be taken or seized (unless the seizure would be lawful and the creditor actually intends to do that);
  • Falsely stating or implying that the consumer has committed a crime.

Note: Where a collection letter goes out under the letterhead of an attorney, it may violate the FDCPA if the attorney had little involvement with collecting the debt and the prime mover was a collection agency. Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996); Nielsen v. Dickerson, 307 F.3d 623 (7th Cir. 2002).

Prohibited Unfair Practices - 15 U.S.C. § 1692f

Unfair practices by debt collectors are prohibited. These include: 

  • Collecting any amount not authorized by law or by the agreement between consumer and creditor
  • Soliciting, accepting or depositing a post-dated check
  • Making the consumer pay any charges for their contacts, such as collect phone calls or telegram fees
  • Threatening to contact the neighbors or employer to get personal information about the consumer, to discuss the debt, or to make any sort of investigation other than to find out the location of the consumer 

Note: In Patzka v. Viterbo College, 917 F. Supp. 654 (W.D. Wis. 1996) the court held the debt collector violated the FDCPA by adding a collection fee and interest to a debt when such items were not permitted by state law. However, an assignee of the debt is permitted to add interest at the same rate as the original creditor, if authorized by the contract with the debtor. PRA III, LLC v. Hund, 364 Ill.App.3d 378 (7th Cir. 2006).

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The Consumer's Options and Remedies

What the Consumer Should Do

Consumers that are being subjected to unfair or unlawful practices by a debt collector should consider doing the following:

  • Write a letter to stop all communications from a collector, and know the consequences of such a letter (see above);
  • Keep a careful record of every phone call, including the name of the person who called, the date, and time of day they called, and everything that was said;
  • Save all correspondence and papers received from the debt collector, including letters, post-cards, telegrams, etc.; these will be important in proving violations of the law;
  • See a lawyer or sue the collector; a lawyer can force the collector to stop contacting the consumer and explain the possible existence of a cause of action.

Remedies in Court

Any lawsuit for violation of the above laws must be brought in federal or state court against the debt collector, and not against the creditor for whom the debt is being collected. There is a one-year statute of limitations. 15 U.S.C. § 1692k(d). Remedies allowed by the law at 15 U.S.C. § 1692k include: 

  • Actual damages
  • Statutory damages, up to $1,000, and
  • Attorneys' fees

In class actions the damages are capped at the lesser of $500,000 or one per cent of the defendant’s net worth.

Note: Injunctive relief is not provided for under the FDCPA.

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