• Credit grantors' collection practices are covered by the law under certain conditions.
• Credit grantors should know what their collection services and attorneys may and may not do under the law.
• Credit grantors could be covered under similar legislation in the future and would have to abide by provisions in the law.
• Creditors may be liable with respect to the collection practices of third-party debt collectors under Section 5 of the Federal Trade Commission Act and, in some cases, under state law.

• Best Finance Company uses the name The Best Collection Service to collect its own debts. It must comply.
• Several hospitals join in a "shared hospital services" concept and collect their own debts through a collection service they set up and give a name other than that of the hospitals, for example, The Best Medical Collectors. They must comply.
• XYZ Department Store collects its own debts in the name of ABCD Division. It must comply.
• A credit grantor mails a series of collection letters that carry a business name other than the company's and that are not clearly designated as being affiliated with the creditor. The credit grantor must comply.

...Certain financial institutions, such as banks and credit unions, become debt collectors under some circumstances, including reciprocal or forwarding arrangements. Examples:

• A bank regularly collects debts for unrelated institutions in which no common ownership is shared. Under such an arrangement, a bank solicits the help of another bank in collecting a defaulted debt of a customer who has relocated. The bank must comply.
• One credit union sends a past due account for collection to an unrelated credit union. The receiving credit union must comply.

...Generally, the collector may communicate once with any third party (anyone other than the debtor) in order to obtain the address, phone number and work address of the debtor. However, under certain conditions, for example to re-verify or correct erroneous information, the collector may communicate with a third party more than once. The collector may not disclose to a third party any information about the debt itself.

...Concerning communications with the debtor:
Generally, the collector may communicate with the debtor (the word "consumer" is used in the law in place of "debtor") between 8 A.M. and 9 P.M. Local time of the debtor. If the collector knows this is an inconvenient time for the debtor, the collector may set up another time for such communication. The collector may communicate with the debtor at work, except when the collector knows or has reason to know that the employer prohibits such communication.

...If the debtor notifies the collector in writing that the debtor refuses to pay and wants communication to stop, the collector must stop communicating with the debtor except to advise the debtor of three possible actions:

1. the debt collector's further efforts will be terminated,
2. the debt collector or creditor may undertake specified remedies that are ordinarily invoked by the collector or creditor, and
3. where applicable, the debt collector or creditor intends to initiate a specified remedy.

   Concerning Harassment, Abuse:

   .....There are six specific instances of abuse that are prohibited by FDCPA. In addition, a collector may not harass, oppress or abuse a debtor in any way not specifically mentioned in the law.

   .....The words "harass," "oppress" and "abuse" are not defined and are interpreted by the courts when cases arise under the law. This type of conduct, though, is not practiced or condoned by ethical collection services.

   Concerning false or misleading representations:

   .....Collectors may not use any false or deceptive representations when collecting debts. In addition to this general prohibition, collectors are forbidden from specific acts, these among them:

   *False representation that the collection agency is affiliated with the United States or any state, or that the collector is an attorney or works for a credit reporting agency.

   *False representation of the amount or legal status of a debt.

   *Threat to take any action that is illegal or that the debt collector does not intend to take.

   *False claim that the consumer committed a crime.

   *False representation that documents are legal process.

4. *Representation that consumers who do not pay their debts will be arrested or imprisoned or that their property will be seized unless such action is legal and the collector intends to take it.

   Concerning unfair practices:

   .....The law specifically prohibits or allows certain practices. Among these are:

   • Collectors may not charge debtors for collect telephone calls or telegrams made when the true purpose of the communication is concealed.
   • A collector may not solicit a postdated check for the purpose of threatening criminal prosecution.
   • A collector may add certain charges to the account if state law permits or the agreement creating the debt allows.

   ....Collectors may accept postdated checks. If the check is postdated by more than 5 days, the collector must send the debtor a written notice of intent to deposit that check not more than 10 nor less than 3 business days prior to such deposit.

   Concerning validation of debts:

   ....A collector must send the debtor written notice of his right to dispute the debt within 5 days of the initial communication with that debtor. A time limit for action by the debtor is set as 30 days from the receipt of the notice from the collector.

   ....In response to a written notice of dispute from the debtor, a collector must give to the debtor a verification of that debt or a copy of the judgment. In most cases, the collector will need from the credit grantor a verification in one of these forms:

   • a copy of the statement of the past-due account
   • a copy of the actual invoice of the unpaid account
   • a copy of the agreement creating the debt
   • some other type of verification

   ....A credit grantor sending such documentation promptly will speed recovery of accounts since collectors may not continue direct collection until documentation or verification is sent to the debtor.

...If credit grantors add charges, such as interest or a delinquency charge on accounts, the collection service should be aware of this.

...Under FDCPA, collectors are allowed to add interest and other charges to the past due account if the agreement creating the debt allows it or if it is permitted by state law.

Concerning skiptracing:

...The law permits a collector to contact a third party in order to locate a skip. When the collector has good initial information from the credit grantor, it is easier and faster to locate the missing debtor. This means a faster recovery of the credit grantor's money.

Concerning reassignment of past-due accounts:

...Credit grantors can assist collection services in complying with the law in the relatively few instances when accounts have been reassigned. An example:

...A credit grantor assigns an account to Collector A. Unable to locate the debtor or told by the debtor that communication by the collector should cease, or being unable to collect for some other reason, Collector A returns the account to the credit grantor, who then reassigns it to Collector B.

...The credit grantor should inform Collector B that this is a reassigned account and what Collector A did on the account, for example, if Collector A located the debtor, communicated with the debtor, sent a verification notice or received a notice that the account was disputed.

...This is important information if a collector is to collect an account for a credit grantor successfully and legally. Credit grantors should never assign the same account to two or more collection agencies at the same time.

Concerning payments made directly to credit grantors by debtors:

...When credit grantors receive a payment directly from the debtor on an account that has been turned over to a collection service, the credit grantor should immediately notify the collector.

...A collector who continues to attempt to collect an account that already has been paid could be vulnerable to charges by the debtor of harassment or use of false representation. A credit grantor could be held jointly responsible.

• Section 5 of the FTC Act
• The Magnuson-Moss FTC Improvements Act, which allows the FTC to apply an action taken against a credit grantor to other credit grantors who were not involved in that action when such actions are adjudicative or litigative in nature or are the result of a final FTC order.

.....The author of FDCPA has said that if and when his subcommittee finds credit grantors are following abusive, misleading or deceptive debt collection practices, they will be included in future legislation.

• A magazine sales company that was collecting debts related to the sale of those magazines violated its 1972 consent agreement, which resulted in its having to pay a civil penalty of $125,000. Also, the company had to sign a new consent agreement that prohibited it from
  1. harassing or intimidating consumers through the use of the telephone or printed matter in the collection of debts,
  2. misrepresenting that a consumer's credit rating could be harmed by nonpayment and
  3. misrepresenting the possibility of legal action against a consumer regarding a debt.
     
• A large mail-order firm signed a consent agreement in which it is prohibited from
  1. contacting third parties when collecting debts, except when trying to locate the debtor,
  2. discussing or threatening to discuss debts with third parties,
  3. contacting consumers at unusual times or places,
  4. contacting consumers that it knows are represented by attorneys and
  5. communicating with consumers who have requested in writing that the company cease communications.
     
• A finance company has signed a consent agreement in which it is prohibited from
  1. using obscene language in collecting its debts,
  2. making repeated telephone calls with the intent to harass debtors,
  3. communicating with debtors at inconvenient times or places,
  4. contacting consumers at their place of employment,
  5. contacting consumers who are represented by an attorney regarding their debt,
  6. contacting consumers who have refused in writing to pay their debts,
  7. threatening to use violence,
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