Change to FDCPA may protect debt collection attorneys

Pending legislation that would amend the Fair Debt Collection Practices Act (FDCPA) would protect the interests of debt collection attorneys in certain cases. According to insideARM, Rep. Ed Perlmutter, D - Colo., introduced the bill recently in the House of Representatives.

The source indicated that proponents of the bill believe that it would provide a technical fix that would not compromise the rights of consumers that the FDCPA aims to protect.

If passed, the bill would ensure that the definition of "debt collector," is changed in order to differentiate from attorneys acting on a collector's behalf. What it would do is protect attorneys from being subject to potential FDCPA violations for making arguments for collection clients while in court.

The source noted that many states have complicated statute of limitations laws that can get attorneys into legal trouble if they attempt to make a case that an account falls under a separate statute of limitations policy. If that happens, they can be in violation of the FDCPA.

"All other communications from collection attorneys must still comply with the FDCPA," Lou Freedman of the National Association of Retail Collection Attorneys told insideARM. "This is a technical amendment to the law."

More FDCPA changes may come
Law​ firm Reed Smith recently reported that the debt collection environment may become more regulated as the Consumer Financial Protection Bureau (CFPB) seeks to expand the reach of FDCPA jurisdiction. The source reported that CFPB officials want to apply the laws within the FDCPA to enterprises that collect their own debts, rather than using a third-party service.

Potentially, this could lead to increased litigation against private enterprises who collect debts but may not be well trained on best collection practices. Potential FDCPA infractions include making false statements or calling debt owners too frequently, as this can be classified as harassing behavior. Also, the manner in which voicemail messages are left for debtors could be a violation of the act if they are not properly constructed.

With so many pending legal pitfalls, private companies would be wise to outsource their collection efforts. Third-party agencies offer professional services by agents who are trained and experienced in adhering to the FDCPA and state regulations.

After a long approval process, Richard Cordray was recently named as the first official Director of the CFPB. Due to his lengthy ratification battle, Cordray has expressed a desire to rapidly start reforming the collection industry. As a result, changes to the FDCPA may come quickly, meaning that all enterprises involved in debt collection should be ready to take the increased regulations in stride.