New Technologies & Forbidden Debt Collection Practices
When the Fair Debt Collection Practices Act (“FDCPA”) was enacted back in 1977, it was designed to help the federal government protect consumers’ privacy rights, while monitoring and enforcing proper debt collection activities. It was also passed to protect the rights of “ethical debt collectors” whose lawful efforts were sometimes confused with those of competitors who took abusive shortcuts to recover outstanding debts.
Like most states, Texas has enacted its own similar statute entitled, The Texas Fair Debt Collection Practices Act, passed in 1997. It’s located in Title 5, Chapter 392 of the state’s Finance Code.
New Technologies Are Clearly Challenging the FDCPA’s Viability
During the past decade, various legal scholars and others have urged the federal government to update the FDCPA in light of the many new and emerging communication technologies. However, no agency could readily respond since Congress never conferred any future rule-making authority on the government entity when it first enacted the law.
Fortunately, after the Dodd-Frank Act was passed “in response to the financial crisis of 2008,” all FDCPA enforcement duties [including rule-making authority] were transferred to the new Consumer Financial Protection Bureau (CFPB).
At present, the CFPB is working hard to address the problems that are surfacing as debt collectors contact putative debtors by using automated dialers, Internet emails, text messages – and even Internet platforms such as Facebook and MySpace. At times, these new technologies appear quite appealing to debt collection agencies.
In fact, one company reported “increased payment rates by nearly 100% within five days” when text messaging was used. However, some privacy violations may have occurred and even prompted lawsuits. In another case, a debt collector used poor judgment when he posted a message on Facebook to the page of a putative debtor’s friend.
The FDCPA Is Responding & New Rules May Be Announced in the Near Future
As of November 2013, the Consumer Financial Protection Bureau (CFPB) took a “first step toward considering consumer protection rules for the debt collection market.” In addition, the Federal Trade Commission (FTC) has remained heavily involved. In fact, at one point, the FTC sponsored a workshop so it could solicit suggestions from consumers, debt collection agencies, and others about the types of new rules required to address the many new technologies.
However, CFPB Director Richard Cordray is clearly leading the way. His bureau has been communicating with the public since late 2013 to draft new rules. (See the CFPB’s Advance Notice of Proposed Rulemaking, published in 12 CFR Part 1006). Although an official publication date has not yet been announced, it’s very likely that new FDCPA rules will be issued during the next six to twelve months.
What Types of General Changes Are We Likely to See?
Broad FDCPA terms like “communication” will have to be expanded to include all new technologies. In addition, the FDCPA’s “disclosure requirement” will have to be “applied to new communication platforms that pose a threat to consumer privacy.”
The CFPB will also probably prevent debt collectors from forcing putative debtors to accept certain new forms of contact -- without first obtaining their “express written consent” to such contact -- especially when it “may cause consumers financial harm.”
Until new rules are released, debt collectors must remain cautious when contacting debtors via new technologies since the courts are quite sensitive to reasonable privacy concerns.
Will the Courts Remain Open to Debt Collectors’ Tech Dilemmas in the Future?
While new legal shifts can always occur, debt collectors appear pleased with the recent decision handed down in the New York case of Zweigenhaft v. Receivables Performance Management LLC. Stated succinctly, this case involved a young man who heard a voicemail left for his father. It made him aware that his father owed a debt. The young man then returned the call and answered questions regarding his identity and the phone number he was using to place his call.
Claiming that the voice mail and conversation with his son “violated the FDCPA’s prohibition on third-party communications,” the father filed a lawsuit. In ruling against the father, the court held that to do otherwise “would place an undue restriction on an ethical debt collector in light of our society’s common use of communication technology.”
Recent opinions like Zweigenhaft indicate that many courts remain eager to properly balance out the needs and concerns of both debt collection agencies and consumers. This type of unbiased approach remains crucial since so many people owe money in this country. In fact, during 2012, “approximately 30 million individuals, or 14% of American adults, had debt that was or had been subject to the collections process (averaging approximately $1,500).”
While we await the release of new rules to supplement the FDCPA, both common sense and conservative courtesies should continue to guide debt collection agencies as they use new technologies to contact putative debtors. In addition, every effort must be made to reach the correct debtor directly. If messages are left, it’s always safest to avoid stating that any money is owed by the party you are trying to contact.