The Fair Debt Collection Practices Act (FDCPA) is a federal law that establishes rules, guidelines and penalties regarding the way debt collectors can attempt to collect from consumers. But it turns out that not everyone contacting you to collect a debt is subject to the FDCPA. There’s a distinction between a creditor—a person or entity that extends you credit—and a debt collector—a third party engaged to collect a debt originally owed to another. While both of these categories may utilize similar behavior and practices, only debt collectors are subject to FDCPA rules and penalties.
U.S. Supreme Court settled a circuit court decided unanimously that one who buys up others’ debts and seeks to collect on them is a creditor, not a debt collector.
Cleveland consumer law attorney Dan Myers says this is significant. Previously in Ohio, these types of operations were viewed as debt collection and subject to the FDCPA. “Consumers now have fewer protections,” Myers says. “There are companies out there who just buy up bad debt and collect on it. It used to be that consumers were protected from the types of bad things they would do, like filing a lawsuit after the statute of limitations had expired, or if they got overzealous or misrepresented. But now those protections are gone. Companies buying bad debt can now do these things without fear of penalty.”
The change also alters the landscape of consumer protection practices like his. “A large segment of cases have disappeared, a lot of what we could do to protect people is gone. We had to tell some clients we’d agreed to represent that we couldn’t help them anymore because the law no longer applied to their situation.”
So what’s a preyed-upon consumer to do? There may be some state or local protections in your area providing more than what federal law can. In Ohio, Myers points to the city of Cleveland and the county of Summit, where Akron is located, as having local consumer protection laws under which consumers can sue and obtain relief. “But it’s rare,” he adds.
In addition, consumers may have protections under the Dodd-Frank Act, which prohibits unfair, deceptive, or abusive acts or practices (UDAAP). The Consumer Financial Protection Bureau (CFPB) has interpreted the UDAAP prohibitions in the context of collecting consumer debts as applying to “original creditors and other covered persons and service providers … involved in collecting debt related to any consumer financial product or service.” This means that even with the Supreme Court’s interpretation of FDCPA terms, creditors who buy others’ debts would nonetheless likely be governed by UDAAP standards.
Consumers can also report concerns to agencies like their state attorney general, or to the Consumer Financial Protection Bureau (CFPB). These organizations are charged with overseeing consumer issues at the state and federal levels. While they may not be able to provide immediate individual relief, a significant uptick in complaints will likely command a response.
Myers also recommends that consumers talk to a knowledgeable local consumer attorney as soon as possible: “It’s important to get an attorney who actually works in the area, so they know what local laws are available.”