A new federal law prohibiting debt collectors from harassing or abusing consumers while collecting debts becomes law today.
The Fair Debt Collection Practices Act makes it a federal offenses for "third party" or independent debt collectors to threaten consumers with violence, use obscene language, make harassing telephone calls, impersonate government officials or attorneys, misrepresent a consumer's legal rights, obtain information under false pretenses, collect more than is legally due or hold debtors up to public ridicule.
President Carter, at the bill signing ceremony last Sept. 20, said, "It is not a minor matter to treat consumers fairly in this country."
The enactment of this law marks the first time the debt collecting business comes under federal regulation. The Federal Trade Commission is charged with primary enforcement of the various provisions.
Some 5,000 agencies in this country collect about $5 billion in past-due bills annually.
President Carter said at the time of the bill signing that most of those agencies "are honest and law-abiding."
But, he warned, the practices of others "need to be corrected."
"This does not mean that consumers can get away with not paying their bills on time," said John L. Spafford. President of Associated Credit Bureaus, Inc., an industry trade group base in Houston.
"The ethical debt collection service can still do what it has always done, which is to make every reasonable attempt to locate an individual who is long overdue on a debt and seek to collect it," Spafford said, "But the law will outlaw the harassment and abusive tactics that have been used in the past by some debt collectors."
According to Spafford, the 1,400 collection service members of the ACB have been operating under a self-imposed set of ethics. He said that the law will not only benefit the consumer, but also help the ethical debt collection services "by separating them from a disreputable element in their industry."
Among the new rules mandated by the law are the following:
Phone calls to debtors can be made only at reasonable hours, defined usually as between 8 a.m. and 9 p.m.
Debt collectors are prohibited from contacting a debtor's employer without the permission of the debtor except to verify employment or to obtain the debtor's address from a former employer.
Debt collectors must routinely form debtors of their rights under the law.
If a debtor informs a collector that he is represented by an attorney, the collector may be forced to cease communicating with the debtor.
If a debtor makes a specific written request, a collector must cease communication with the debtor, after notirfying the debtor of the legal remedies still available for collection of the debt.
A collector may only file suit to collect a debt in the location where the debt was incurred, or where the debtor lives:
When attempting to get information about the location of a debtor, a collector must not volunteer that he or she is a debt collector, unless specifically asked.
The final rule is designed to protect the privacy of the debtor.
Collectors may be sued by individuals or in class action for violation of the above rules. The collector is liable for actual damages, plus $1,000 additional damages and reasonable attorney's fees.
In class action cases the collector may be assessed up to $500,000 or one percent of his net worth, whichever is less.