What are collection practices?
Debt collection practices are all actions and procedures that collection agencies take during a standard debt recovery process, implemented by a debt collection agent. Such agent can be the original creditor, who has lent a debt amount to the debtor; a private debt recovery company, acting on behalf of the lender; a debt buyer, purchased default profiles from the creditor; or a debt attorney, who can either be part of the DCA (Debt Collection Company) or can act as an individual company. All these agents employ standard debt recovery practices in order to succeed in recovering a delinquent monetary sum from the debtor and at the same time to protect the debtor as a consumer and his lawful rights. According to different regulations, there have been specific practices adopted as legal, and such, which are considered as harassing and violating.
Fair debt collection practices
There are different laws, which regulate the actions and authorities of debt recovery agents. In accordance with the Fair Debt Collection Practices Act (U.S.), the Office of Fair Trading (UK) and other country laws, a debt collection agent can follow certain debt recovery practices, which are governed as fair. All debt collectors have the right to contact the subject of debt within the accepted time frame during standard working days. The same can communicate with the debtor by phone, email, send him fax and text messages and also letters in writing. They are authorised to contact debtor’s employer or family members, in case they cannot locate the subject of debt, but only if they do not disclose the purpose of the call.
Different written documents can also be addressed to the indebted subject, such as general reminders, harsh collection letters, letters of demand, letters before action, etc. The content of these documents is also regulated and has to consist of precise and correct information regarding creditor’s and DCA’s company name, the actual debt amount and any additional charges, if applicable. If the letters are utilised as final reminders they have to enlist a payment deadline and a date from which court actions will be executed.
In-house personal visits are allowed as well, again during accepted hours. If the agent has standard authorities, the default collection practices will include only advisory and offer different negotiation plans to the debtor. If the agent is a bailiff or a debt recovery solicitor, he is authorised to seize personal belongings and possession from the debtor, in order the debt amount to be settled. After the seizure, the agent can sell these belongings and recover the monetary sum of the default.
The creditor or the agency, representing the lender, can employ the usage of outside private debt recovery solicitors into the default recovery practices process. Such lawyers can perform compulsory seizure of debtor’s personal belongings in order to settle the entire default amount. They can also suggest different payment plans for the debtor, which might be more convenient and compatible with debtor’s financial situation. Debt collection attorneys, with court’s assistance and permission, can also force wage garnishment, small claims court procedures, etc.
Unfair debt collection practices
According to state and international laws and regulations for fair debt collection practices, a debt collector is not allowed to contact the debtor outside the accepted time frame, nor during holidays or weekends. If a DCA or a creditor uses any kind of harassment (verbal or written) or violation debt collection practices (against the debtor, debtor’s property or reputation), this will be considered as law infringement. A debt agent is not allowed to involve and engage any other person in the debt issue, except the subject of debt himself.
Sending written letters with threatening character, including false information, will be also considered as a breach of law. Such untrue information can be false representation of the debt amount, false creditor’s or DCA’s trading name, misleading accusations or threats for unreal or not possible court or legal proceedings. As unfair debt recovery practices are also considered any threats to legal actions, which cannot or will not be carried out on the subject of debt.
If a debt recovery agency performs the collection of an interest, higher than the amount authorised by law or implicated in the contract between the first party (creditor) and the second party (consumer), such actions will be indicated as unfair debt recovery practices.
FDCPA’s and OFT’s regulations define that a creditor or a first party DCA are not reckoned as standard debt recovery agencies. As the mentioned two laws (respectively for U.S. and UK) regulate only third-party DCA’s activities, such first-party agents are not recognised as a classical DCA. This designation means that a creditor can legally collect debts on behalf of his own company and can charge the indebted subject a late payment fee, but cannot request a DCA’s interest payment from the consumer, as it will be again acknowledged as unfair debt collection practices.
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