The Fair Debt Collections Practices Act only applies to consumer debts and, by and large, the actions of debt collectors (or original creditors pretending to be debt collectors). This is broken down into the questions of the type of debt for which collection is sought and the type of entity seeking the debt. In this article we will first discuss what the FDCPA covers, and then what that means to you.
The FDCPA applies to “consumer debts,” or debts incurred primarily for personal, family, or household purposes. 15 U.S.C. Sections 1692a(3) and (5); Creighton v. Emporia Credit Service, Inc., 981 F.Supp. 411 (E.D.Va. 1997). When the debt is rung up on a corporate or business credit card, the courts will look into the nature of the debt – and not simply the name on the card. As I have pointed out elsewhere, however, making this argument can be dangerous to the “corporate shield” since it suggests a merging of assets which is sometimes used to defeat the corporate shield and allow a creditor to pursue an owner of the corporation.
The act also only protects “natural” persons, which means it applies only to actual people and not corporations or separate associations. Again, since debt collectors never actually speak to corporations or businesses, but only to human individuals, this simply means that if a debt collector is calling on a debt rung up for business purposes, or calling a business regarding its debt (and harassing whoever picks up the phone, for example), the FDCPA does not apply.
Because the FDCPA applies to only consumer debt, it applies only to “transactions” engaged in primarily for personal, family, or household debt. In other words, it does not apply to debts generated by child support obligations, tort claims (lawsuits against you for harming another person), or personal taxes, for example. Mabe v. G.C. Services Limited Partnership, 32 F.3d 86 (4th Cir. 1994); Zimmerman v. HBO Affiliate Group, 834 F. 2d 1163 (3rd Cir. 1987); Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367 (11th Cir. 1998). On the other hand, the term “transaction” can be fairly broad, and would include things like condominium fees or other fees or debts incurred as part of a transaction that might, in fact, have occurred years before the debt in question arose. Because the FDCPA applies to debts arising out of transactions, it has applied to condo fees for a house the consumer once lived in but later (at the time of the FDCPA violation) was renting out to others for the purpose of generating income. This would suggest the reverse might also be true – a condo originally purchased for business purposes but later converted to personal use might not be covered by the FDCPA, but I have not seen a case with that holding.
The Act does apply to things you might consider “non-credit” obligations, such as bad check debts, condominium assessment fees, residential rental payments, municipal water and sewer service, and other non-credit consumer obligations - Bass v. Stolper, Koritzinsky,Brewster & Neider, S.C., 111 F.3d 1322 (7th Cir. 1997); FTC v. Check Investors, 502 F.3d 159 (3d Cir. 2007).
In general, the FDCPA applies to “debt collectors.” These are entities that seek payment of debts that were, or are claimed to have been, owed to someone else at the time they were generated. This includes junk debt buyers and their law firms, of course, and it can also include companies or firms who regularly foreclose on property as a means of collecting a debt. We will discuss foreclosures at greater length elsewhere, however.
What the FDCPA does not cover is actions by an “original creditor” (i.e., the company or person who claims you borrowed from it) unless it is pretending to be another entity. Sometimes original creditors seek to exert additional pressure on delinquent bill payers by pretending to be a debt collector, and when they do this they are not only covered by the FDCPA but also often in violation of it, since the Act prohibits deception and unfair collection methods. The Act will also not cover the actions of loan “servicers,” which are financial companies that buy debt not in default and manage it as if they had extended credit in the first place.
As I am sure you know, the FDCPA requires and prohibits certain actions, giving you defenses and the right to counterclaim or file suit against a debt collector. If the FDCPA does not apply, then, you simply cannot claim any rights under it – cannot seek verification, bring claims for deception or abusive conduct, or seek to enforce any other rights under the FDCPA against non-debt collectors or against debt collectors for their actions in pursuit of non-covered debt. Making such a claim could damage your ability to defend against these debts, so you should carefully consider whether the Act applies before attempting to assert rights under it.
If your debt or bill collector is not covered under the FDCPA, that does not necessarily mean that you have no rights worth asserting. It just means that you must look somewhere else for them. Many states have their own debt collection laws, and these may apply to situations the FDCPA does not. Also, more generally, most states have laws regarding how “outrageous” a person – including a debt collector – is allowed to be. One of the great things about the FDCPA is that it gives some specific rules – debt collectors cannot call before 8 in the morning, for example, whereas a few calls by an original creditor early in the morning will probably not be illegal. As the behavior becomes more and more extreme, however, the more likely it is to be “outrageous” enough to give you the right to sue. Threats of physical harm or police activity probably go over this line, for example; cussing you out a time or two? - maybe not. It is simply not clear what non-debt collectors are allowed to do in many instances.
You may want to consider getting a legal plan that allows you to have a debt defense lawyer when and if you need one, and this could be part of a debt reduction program. I have finally found a plan that looks like it will help my customers obtain the representation they need and still control their costs. For information on that, go to this link: Getting a Lawyer.
You will also want to take steps to control your costs and learn how to handle the debt collection process. This link will take you to a video series that will help you understand the debt collection process in general.