Your bank, lender or loan servicer is probably violating the Fair Debt Collection Practices Act all day and every time their employees or representatives contact you about your loan during the foreclosure process or loan modification efforts. Did you ever think about that?

The FDCPA was created in response to abusive conduct by collection agencies and concern that the abuses were causing an increase in the filings of personal bankruptcies. The purpose of the Act is to provide strict guidelines for collection agencies which are seeking to collect legitimate debts – while providing protections and remedies for debtors who may be subjected to illegal conduct.

The FDCPA applies to all personal, family, and household debts, including but not limited to first and second mortgages, car loans, medical bills, and credit card accounts. In addition to the FDCPA, most states have parallel laws, which typically prohibit the same types of abusive debt collection (and which may cover even a broader range of debts than the federal law.

Under the FDCPA, a “debt collector” is defined as any person or entity that regularly collects debts owed to others. This definition includes law firms who represent banks in foreclosure proceedings and perform debt collection services on a regular basis. Even where a debt is fully legitimate, a debt collector’s conduct is still restricted by this law.

Normally, “in house” collection agents are not covered by the Act. For example, if a consumer has a store credit card, and the store’s own collection department contacts the consumer, the FDCPA does not apply (however, if the same store uses a third party collection agency to contact the consumer with regard to the same debt, the third party’s conduct is restricted by the FDCPA). Similarly, when a mortgage becomes delinquent, the original lender or owner of the loan may be exempt from the Act if the lender is: (1) Collecting on its own debt; (2) Acting under its own corporate name; (3) Not engaged primarily in the business of collecting debts.

However, in the case of the mortgage lending business over the past decade, a vast majority (if nearly all) loans are sold once they go into default. Accordingly, the FDCPA applies anytime a mortgage loan is sold or transferred and another servicer begins debt collection attempts either prior to, or after commencement of foreclosure. Once a lender or servicing company “changes” after a loan goes into default, the “new” company which purchases the debt is considered a “collection agency” and must comply with all provisions of the law. And as noted above, any law office hired by a lender to pursue the debt or initiate foreclosure proceedings must also comply with the FDCPA and may be held responsible for any failures.

Examples of conduct specifically prohibited by the FDCPA include the following:

• Contacting a third party who is not responsible for the debt, such as a relative, neighbor, or employer (co-signers, however, may be contacted by the debt collector);
• Threatening to refer an account to an attorney, harm a consumer’s credit rating, or begin repossession or garnishment – without actual intention of carrying out the threat. (However, a collector may warn of an actual impending intention to refer a case to an attorney or to report a debt to a credit agency. What they cannot do is use a false threat to try to intimidate a consumer into paying;
• Making repeated telephone calls at unreasonable times. The act defines “unreasonable times” as contact before 8:00 AM or after 9:00 PM – unless the consumer has given the debt collector permission to make calls during those hours;
• Placing telephone calls to an inconvenient place (This includes calling a consumer at work in violation of a policy by an employer that is known to the debt collector, or following a request by a consumer that they not call the consumer at work;
• When placing a telephone call to a consumer at work, informing the employer of the purpose of the call, unless first asked by the employer;
• Using obscenity, racial slurs or insults;
• Seeking collection fees or interest charges not specifically permitted by contract or by state law;
• Requesting post-dated checks with the intention to prosecute if they bounce;
• Suing in courts far removed from the consumers place of residence;
• Making fraudulent representations such as falsely claiming that the debt collector is an attorney; falsely claiming to have started a lawsuit; using a false name, or using stationery that is designed to give a false impression of a communication from a Court or Official Government Agency;
• Using false pretenses to collect information about the consumer such as pretending to be conducting a survey; and
• Threatening the consumer with arrest if the debt remains unpaid.

Additionally, once a debt collector is informed that a consumer is represented by a law firm or individual attorney, the debt collector must immediately cease all communications with the consumer. (Note: This particular section is being violated frequently by many of the lenders and servicers with which our office has been dealing. Typically, the lender/servicer is acknowledging receipt of our correspondence, but continues to contact the client and demand repayment of the subject loan. Our office is addressing these practices aggressively in current correspondence).

Violation of these and other sections of the FDCPA can subject a debt collector to monetary damages and an obligation to pay the consumer’s attorneys’ fees. Also, the Federal Trade Commission can enforce the FDCPA through “administrative action”, including the issuance of “cease and desist” orders and injunctions.

Surprise, you may be the victim of a lender or servicer that is violating the FDCPA in your loan modification efforts and foreclosure defense matters. Review your correspondence, think about who has been calling you and stand up for your rights.

Kevin L. Hagen, Esquire is a partner and shareholder with the Law Offices of Hagen Hagen, P.A. in Ft. Lauderdale, Florida. His firm vigorously defends foreclosure matters for borrowers throughout the state. Available for consultation at http://www.FloridaForeclosureFighter.com. The article was co-authored by Chris Qualmann, senior negotiator and compliance manager for the Mitigation Law Group, a national consumer advocacy coalition of small and solo law practitioners handling loan modification and mitigation efforts across the country http://www.MitigationLawGroup.com.

Popularity: 1% [?]