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Consumer Rights Statutes

In addition to foreclosure defense and consumer bankruptcy, state and federal law both include other powerful consumer protections. Many of these laws are also violated when creditors violate the automatic stay or the bankruptcy discharge. You may have already experienced violations of certain consumer protection statutes and been utterly unaware of the violation. This section discusses two consumer rights statutes that Atlas Consumer Law has used to protect the rights of its clients.

The Fair Debt Collection Practices Act [i]

Who Is A Debt Collector?

The Fair Debt Collection Practices Act (FDCPA) protects consumers from the unfair and harassing conduct of debt collectors. While many people are under the impression that the FDCPA covers all debt collection activity, this is not necessarily the case. The FDCPA regulates the conduct of debt collectors. A debt collector is defined by the statute, [ii] and does not include creditors who collect their own debts while using their own name. For example, if Bob’s Electronics Hut is collecting a debt and is collecting in its own name, then Bob’s Electronics Hut is not a debt collector as defined by the FDCPA. However, if Bob’s Electronics Hut collects under the name, “Bob’s Collections,” then it is likely that Bob’s is acting as a debt collector. If Bob’s Electronics Hut hires Dewey, Collectem, & Howe, P.C. to collect on debts owed to Bob’s, Dewey, Collectem & Howe, P.C. is absolutely acting as a debt collector as defined by the FDCPA.

What Conduct Does The Fair Debt Collection Practices Act Prohibit?

The Fair Debt Collection Practices Act prohibits a wide range of conduct. Among other things, it dictates when debt collectors may contact you, whom debt collectors may contact, and what debt collectors may say to you.

General Rules Regarding Contacting Consumers

Debt collectors are prohibited from calling you before 8 am or after 9 pm. This calling window is deemed to be reasonable by Congress. Anything outside that window is technically a violation of the Act. Debt collectors cannot contact you directly once they are informed that you are represented by an attorney. Keep in mind that being represented by an attorney doesn't require you to be involved in a lawsuit or a bankruptcy filing. Plenty of people retain attorneys to advise them in their financial affairs. More probably would if they knew about this provision of the Act. Once a debt collector receives a written notice of representation from your attorney, all collection calls must stop.

Debt collectors cannot communicate with third parties about your debt without your consent. If a debt collector calls your employer and tells the receptionist that you are being contacted regarding a debt, then that is a violation of the Act. Debt collectors may attempt to confirm specific information about you, such as your contact information or address, but they cannot inform others of your debts. This includes your family. If a debt collector calls your mother and threatens a lawsuit if your debt is not paid, it is a violation of the Act.

If you tell the debt collector to stop contacting you, or if you dispute the debt, the debt collector may not call you. The only exceptions that allow a debt collector to contact you are to confirm that it will no longer contact you, to inform you of the remedies available to the creditor, and to give you notice that the creditor has elected to pursue a remedy. This means that once you tell a debt collector to stop contacting you, you may receive a letter confirming the request, and the debt collector may still contact you to inform you that it has decided to pursue a lawsuit against you. However, the attempts to collect the debt must stop.

Harassment and Abuse Is Prohibited

Debt collectors are prohibited from using violence or the threat of violence to collect a debt. This means that if the local auto title loan shop sends a thug with a baseball bat to your home to collect a debt, then it is in violation of the FDCPA, in addition to the many criminal statutes such an action would violate. It also means that a debt collector cannot say things like, "I will come to your house and force you to pay." Debt collectors are also prohibited from using profanity or insulting language when they contact you. If a debt collector said, “You f**king deadbeat, you had better pay up or I’ll send someone to your house to beat the money out of you!” that statement would include three violations of the FDCPA.

Debt collectors are prohibited from making excessive phone calls in one day. The Act does not set a specific limit, but clearly persistence becomes harassment at some point. Two phone calls in one day are within the limits defined by the Act. Twenty calls in one day are a clear violation. The Act specifically states that debt collectors are engaging in harassment by “causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” [iii] If you receive three calls a day for one week, it is difficult to establish that the conduct violates this provision. However, if you receive 99 calls in one week, it is much more obvious that a violation has occurred.

False or Misleading Representations Are Prohibited

Debt collectors are prohibited from lying to collect a debt. The Act provides a list of the types of false and misleading representations that are prohibited. [iv] For example, a debt collector cannot claim to be backed by or vouched for by the U.S. government or any state government. They cannot lie about the amount of debt owed, why the debt is owed, or about any services or compensation that they have provided to you. Debt collectors cannot pose as attorneys.

They cannot claim that failure to pay will result in imprisonment, arrest, garnishment, or other remedies unless those remedies are available and the creditor intends to use them. One example of this behavior is a debt collector telling a person that the police are outside her home waiting to arrest her and take her children into protective custody. Under no circumstances is such a remedy available to any debt collector, and such a statement is a clear and blatant violation of the Act.

Debt collectors are also not allowed to threaten consumers. This includes threatening illegal actions like violence. Even an “idle” threat is prohibited; debt collectors cannot threaten to take an action that they do not intend to take. This means that a statement like, “If you don’t pay this credit card off, I’m going to buy a full-page ad in the Chicago Tribune so that everyone knows you’re a deadbeat,” violates the Act. Given that taking out the ad would also violate the Act, one can assume that the statement is an “idle” threat. Debt collectors also cannot claim that you are committing a crime by not paying your debts. Debtor’s prison was abolished centuries ago.

Anyone who has received a call from a debt collector has likely heard the following statement, “This is an attempt to collect a debt. Any information obtained may be used to assist in collection efforts.” This statement is required by the Act. A debt collector that does not identify itself as a debt collector is breaking the law. This statement must appear on any correspondence you receive and must appear on any lawsuit filed against you as well.

Unfair Practices Are Prohibited

Debt collectors cannot engage in unfair or unconscionable behavior. [v] For instance, making up false fees is prohibited. Disguising one fee as another is prohibited. Debt collectors cannot collect fees that are not allowed by law or described in the agreement that created the debt. For example, if your car loan provides for a late payment fee of $50, the debt collector cannot try to increase that fee. Consumers who are currently making payments on a Chapter 13 plan should closely monitor how their creditors are applying the plan payments. In particular, many mortgage servicers will improperly add fees onto the loan balance during a bankruptcy. This not only violates the FDCPA, it also violates the U.S. Bankruptcy Code.

This section of the Act also prohibits debt collectors from sending post cards or other mail that identifies the sender as a debt collector. The Act jealously protects the privacy of consumers in this regard. If a debt collector sends you a post card, and someone else reads it, the debt collector has violated the Act twice: once for sending the post card and once for communicating with a third party about your debt. Even though the person reading the post card wasn’t necessarily intended by the debt collector, it counts as a communication to a third party.

Your Remedies under the Act

Violations of the Act expose debt collectors to legal liability. For each violation of the Act, creditors are liable for actual damages suffered by the debtor, statutory damages of $1,000, and attorney's fees. Actual damages are damages that can be proven at trial. For instance, if the harassing behavior of a debt collector causes you to lose sleep and experience emotional distress, you may be able to recover actual damages. The Act also provides for class actions, which are lawsuits where a specific group of consumers claim to have been harmed in the same way by the same debt collector. Class actions are particularly dangerous for debt collectors because they magnify the impact of one small claim by multiplying that claim many times over. It is important to note that the Act has a one-year statute of limitations. This means that you must file a lawsuit against a debt collector within a year of it violating the Act.

The Illinois Consumer Fraud and Deceptive Business Practices Act [vi]

The Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) is a broad piece of legislation that gives Illinois citizens powerful protections against a wide range of behavior. At its most broad level, the Act prohibits unfair methods of competition and unfair acts and practices in the conduct of commerce. [vii] The language of the Act incorporates elements of the Federal Trade Commission Act [viii], which also prohibits unfair and deceptive business practices. In addition to this very broad language, the Act contains specific provisions that regulate 64 different commercial activities. [ix] For all practical purposes, most consumers rely on the Act’s prohibition of unfair and deceptive practices to make their case.

This is particularly true when consumers bring adversary proceedings against their creditors in a bankruptcy case, or when a consumer files a Fair Debt Collection Practices Act lawsuit against a debt collector. When a creditor attempts to collect a debt in violation of the automatic stay, it may also be violating ICFA. Consumers who have valid ICFA claims may seek their actual damages and punitive damages, with a few exceptions. [x]

Sue Cornelius, Plainfield, Illinois: A Consumer Fraud Claim

Sue runs a very successful online retail business selling hand-crafted soaps, candles, and other items. She filed a Chapter 13 bankruptcy to strip the second mortgage from her home and to cram down the loan on her 3 year old car. Shortly after she filed her case, Sue received a letter from a debt collection agency hired by her auto loan lender. The letter informed her that due to her bankruptcy filing, she was in breach of her loan agreement and the car would be repossessed unless she paid the loan balance in full within 30 days. This behavior clearly violates the automatic stay, which went into effect when Sue filed her bankruptcy case. It also violates the Fair Debt Collection Practices Act. The debt collector is impermissibly contacting her, is making false representations, and is engaged in an unfair practice (violating the automatic stay). This behavior also violates ICFA because the debt collector is misrepresenting a material fact (that she is in breach of her loan agreement) in the hopes that she will rely on the statement and pay the money. Sue contacts her attorney, and ultimately files an adversary proceeding in the Bankruptcy Court based on the debt collector’s conduct. Sue can attempt to recover damages for each statutory violation.