When Does the FDCPA Apply? | What Types of Debt Are Subject to the FDCPA?

In this article we answer the questions, “who is required to follow the Fair Debt Collection Practices Act?” and “what types of debt are subject to the FDCPA?” We answer the following questions: “what is The Fair Debt Collection Practices Act?, “who qualifies as a debt collector under The Fair Debt Collection Practices Act?, “are in-house collectors subject to The Fair Debt Collection Practices Act?, “what types of debts are covered under The Fair Debt Collection Practices Act?”

What is The Fair Debt Collection Practices Act (FDCPA)?

The Fair Debt Collection Practices Act makes it illegal for debt collectors to use abusive, unfair, or deceptive practices when communicating with debtors. Sometimes used in conjunction with the Fair Credit Reporting Act, The Fair Debt Collection Practices Act exists to eliminate abusive practices in the collection of consumer debts, promote fair debt collection, and provide consumers with an avenue for disputing and obtaining validation of debt information. Amended in 2010, the FDCPA restricts the means and methods by which debt collectors can contact debtors, including communication with debt collectors, harassing or abusive practices, truthfulness in communication, unfair practices, and debt validation.

For more on this, check out our article: The Fair Debt Collection Practices Act Explained.

Who qualifies as a debt collector under The Fair Debt Collection Practices Act?

The FDCPA defines a debt collector as “any person who uses any instrumentality of interstate commerce of the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” Under the FDCPA, debt collectors include collection agencies, debt buyers, and lawyers who regularly collect debts as part of their business. The Act only applies to third party debt collectors, not internal collectors for original creditors (branches or departments of the company that originally loaned the money). For example, if you owed money to your local grocery store and the owner of the store calls you to collect that debt, he or she is not a debt collector under the terms of the FDCPA. The FDCPA’s definitions of “consumers” and “debt” restrict the coverage of the Act to personal, family, or household transactions; therefore, debts incurred by businesses are not subject to the FDCPA. After a certain time period, usually six months, many original lenders sell their uncollected debt to other companies. Both outside collection agencies and companies that assume bad debt must follow the FDCPA’s guidelines.

Are in-house collectors subject to The Fair Debt Collection Practices Act?

The FDCPA does have an interesting loophole for “in-house collectors,” who include a branch of the bank, retailor, or credit card firm that originally made the loan or offered the credit line. These lenders are exempt from the FDCPA’s prohibitions against abusive and unfair practices, because lawmakers assumed that in-house collectors wouldn’t be as aggressive in their collection tactics. As the Federal Trade Commission complaint records show, many in-house collectors still abuse this loophole.

What types of debts are covered under The Fair Debt Collection Practices Act?

Any business debts are not covered by the FDCPA. The following debts are covered:

·       Credit card debt

·       Auto loans

·       Retail refinancing

·       Medical bills

·       Student loans

·       Mortgage loans

·       Other household debts

What are debt collectors allowed and not allowed to do?

For more information on exactly what debt creditors are allowed and not allowed to do when it comes to collecting their debts, see our related article, Rules for Debt Collectors Under the FDCPA.