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What the Fair Debt Collection Practices Act Means for Lenders

old phone and new phone
By Connie Shoemaker

2 minutes

Certain basic principles of the rule still apply, even as technology changes.

Sponsored by SWBC

The Fair Debt Collection Practices Act was passed in 1977 to restrict abusive activity by debt collectors. It covers the activity of anyone who collects debts owed to another party. That means it doesn’t apply directly to the original creditor, but only the third parties working to collect debts on the creditors’ behalf.

However, it’s important to note that many states have adopted additional versions of the FDCPA that enforce similar rules and regulations to the original creditor as well. So whether your credit union outsources its collection efforts, manages them in-house, or does a combination of both, the biggest priority is to make sure collectors are properly trained, credited and operating under the rules for every borrower interaction. Proper training covers the guidelines under which debt collectors may conduct business, define the rights of consumers, and prescribe penalties and violations of the Act. 

Such valuable resources as the American Collectors Association can serve as a training resource and knowledge center for your operations. ACA works to provide collection operations with best practices and guidance on how to operate under FDCPA and other relevant regulations and acts.

The State of FDCPA Today

Since the origination of FDCPA 40 years ago, significant changes to technology and customer communication have left the law outdated and open for interpretation.

This was first noticed when answering machines became popular. Since the law was written before answering machines existed, it was up to the courts to decide how to interpret the law. The courts decided that leaving an audio recording on an answering machine was “communication,” and since collectors didn’t know who might be listening when an answering machine message was played, they could not disclose information that would violate the FDCPA when leaving a message. 

Fast forward to a few years later and cell phone voicemail has taken over the traditional answering machine. The courts ruled that a cell phone voicemail is private enough for collectors to use without violating FDCPA, though obviously leaving abusive or harassing messages would clearly break the law.

Texts and social media are much newer forms of communication that can be used to collect debts. While the law technically does not prohibit collectors from contacting someone through text and social media, FDCPA’s communication guidelines should be applied. 

While the traditional FDCPA laws are being strongly upheld, there’s plenty of room for updates to keep pace with modern technology. To make sure your institution is staying compliant, download our free e-book!

Connie Shoemaker is SVP/account services operations for CUES Supplier member SWBC, San Antonio, Texas.

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