Debt collection practices, whether by creditors, collection agencies, or attorneys, are a frequent and often emotionally charged source of consumer complaints. Many people finding themselves subject to debt collection may already be experiencing a broad range of financial and personal difficulties. Debt collection is an added indignity. Although debtors are bound to honor their contracts (with a few exceptions for bankruptcies), they should not find themselves subject to harassing and deceptive collection practices.
Overzealous and occasionally unscrupulous debt collectors have given the field of debt collection a history of abusive practices. Some of the more common abuses include:
In response to such abuses, both New Hampshire and federal statutes regulate and control the time, manner, and substance of collection procedures, and provide consumers with remedies against abusive collection activities.
Debt collection practices are governed by two laws: New Hampshire's Unfair, Deceptive or Unreasonable Collection Practices Act (RSA 358-C) (State Act) and the federal Fair Debt Collection Practices Act (15 U.S.C. § 1692-1695) (FDCPA). In addition, the Federal Trade Commission (FTC) has guidelines for the collection industry describing specific acts and practices the FTC considers to be in violation of the FDCPA.
Type of Debts Covered
Both the State Act and FDCPA cover debt collection activities against consumers arising out of "consumer debts" incurred primarily for personal, family or household purposes. This covers nearly the whole range of personal transactions for which a consumer may incur debt, including retail financing, credit card purchases, auto loans, and first and second mortgages. No minimum or maximum dollar amount triggers or cancels the protections available under either statute.
The State Act and the FDCPA provide nearly parallel protections for consumers. Debt collectors who are operating in New Hampshire must comply with the requirements of both the State Act and FDCPA. The redresses offered to consumer debtors who find themselves harassed by unscrupulous debt collects are somewhat different.
Types of Debt Collectors Covered
The most important difference between the two laws is that the State Act applies to creditors collecting debts owed to them in their regular course of business, while FDCPA generally does not.
Under the State Act, a debt collector is: any person who by direct or indirect action, conduct or practice enforces or attempts to enforce a debt owed … as a result of a consumer credit transaction. This definition applies equally to:
Example: Dr. Helper's office manager, Toni True, is in charge of collecting on past due accounts. Toni tries to be as understanding as possible but the doctor has bills to pay too. When Dr. Helper gets complaints about the overly zealous measures Toni uses to collect debts owed by patients, she discovers that Toni's actions are covered by the State Act, although not by FDCPA.
The FDCPA applies to collection agencies, factors, and repossession companies but excludes most creditors attempting to collect debts owed to them in the regular course of their own businesses. However, this exclusion does not apply to creditors who suggest that their collection efforts are being performed by a third party.
FDCPA covers some "debt collectors" who may be beyond the scope of the State Act. For example, FDCPA explicitly applies to attorneys who act as debt collectors. Whether the State Act applies to attorneys remains an unresolved
Example: The Jollytime Company uses its own in-house attorney, Sage Law, to collect debts and therefore is not ordinarily subject to FDCPA. However, if Ms. Law does not identify herself to a debtor as an employee of the Jollytime Company, the debtor might be led to think that Jollytime had already "turned the matter over" to independent lawyers. In this case, FDCPA would apply to Jollytime and Ms. Law.
How Debtors Are Protected
Both the State Act and FDCPA prohibit debt collectors from engaging in certain practices, and give debtors some protection during the debt collection process. In general, both statutes:
What Debt Collectors Must Do
The debt collector must disclose in any written or telephone communication to the consumer:
In addition, under FDCPA, debt collectors must follow up an initial phone contact with a written communication within 5 days containing the following information:
What Debt Collectors Cannot Do
A wide range of collection activities is specifically prohibited. Generally these prohibited activities fall into two categories: actions designed to intimidate, harass or annoy consumer debtors; and actions that are unfair, misleading or deceptive.
A number of misleading or deceptive tactics by debt collectors are expressly prohibited. Debt collector may not mislead debtors about who they are, may not mislead debtors about the debts, may not mislead about what actions they will be taking, or make any false representations in order to obtain information.
In addition, FDCPA specifically lists a number of tactics regarding the collection of money from consumers by debt collectors which it declares unfair. Debt collectors may not:
Example: Sue receives a notice from a debt collection agency that her magazine subscription is still unpaid. She finds the canceled check that she wrote to pay for the subscription several months ago. Sue writes a letter to the debt collection agency stating that she has paid for her subscription, attaching a photocopy of both sides of her canceled check.
Consumer-debtors are given several legal rights upon being contacted by a debt collector.
The debtor has the right to dispute the existence or validity of the amount of the debt. The debtor must be informed of this right by the debt collector. The debtor who wishes to dispute all or any portion of the alleged debt must notify the debt collector that all or part of a claimed debt is disputed. The notice about the disputed debt must be:
A disputed debt could be:
Bankruptcy is a remedy open to those with overwhelming debt. Congress revised the federal bankruptcy law, and the new rules went into effect in October 2005. Debtors may no longer have a choice of whether they file a Chapter 7 (straight) or Chapter 13 (wage earner repayment plan) bankruptcy. The new rules will bar some people from filing under Chapter 7 and push them into filing a Chapter 13 repayment plan. Furthermore, counseling is now required of all those who file for bankruptcy.
What counts as allowable living expenses when calculating how much income is available for debt repayment has been modified. Only allowable expenses are included as living expenses. More assets may be liquidated (sold) to help with debt repayment.
When, exactly, a lawsuit can be brought regarding a debt depends entirely upon the type of claim and/or the basis of the debt. For example, a credit card company has three years to sue on a debt, while a debt already reduced to judgment in a court may be subject to a collection lawsuit for up to 20 years. Most debt claims, however, that arise from a written credit contract must be brought within 3 years of the payment default. There are exceptions to this rule, for example, a retail sales installment contract claim may be brought within 4 years of the default of payment. Also, a person can sue to collect on a judgment from a court for a longer period of time.
Example: Anthony receives a telephone call from a debt collection agency stating that he owes money on a credit card that he got rid of 7 years ago. Anthony does not make a promise to pay something each month. In stead he asks the agency to send information about the debt. After he gets a notice from the agency, he writes a letter stating that he believes the debt to no longer be valid because it is too old.
Note: If you receive a call from a debt collector or a creditor about an old debt, you should be careful to avoid making a new promise to pay. Instead, you should review the debt, perhaps with an attorney, to make sure it is still valid. If you do make a promise to pay an old debt that was time-barred, you effectively "reaffirm" that debt so that it can be collected as if it were a new debt.
What the Debt Collector Must Do
After receiving the notice of dispute from the consumer-debtor, the debt collector must:
If more than one debt is being collected by the debt collector, the consumer-debtor needs to instruct the debt collector on how to apply any payments made to those other debts. The debt collector may not apply a payment to a disputed debt.
Limiting Debt Collector Contact
The consumer-debtor has the right to limit further contacts by the debt collector. Under the FDCPA, you can stop a debt collector from contacting you by writing a letter to the debt collector asking that contact stop. The letter should include a statement such as: "I am exercising my right under federal law and I want you to stop contacting me." This letter should be sent to the debt collector by certified mail with a return receipt requested. Keep a copy of the letter for your files. Understand, however, that this type of letter does not make the debt go away if you really do owe it. You can still be sued for the debt.
Once the debt collector receives the letter, the collector should have no more contact with you, with the following two exceptions:
Contact with the debt collector will also stop if you are represented by an attorney, and the debt collector is notified of your legal representation. Thereafter, all communications must be directed to the attorney, unless the attorney fails to answer the related correspondence or return phone calls within 10 days. Under the State Act, you may also be represented by a financial counseling organization or any other similar person, in addition to an attorney. The debt collector then must similarly only contact the designated representative when notified to do so.
What a Debtor Can Do if a Debt Collector Violates the Law
Both the State Act and FDCPA permit consumers to sue debt collectors who engage in improper collection practices. Both Acts provide for injunctive relief in the form of court orders forbidding a debt collector to continue any improper practice. In addition, each Act provides actual and statutory damages for individual consumers, as well as costs and attorney's fees. The State Act permits for the greater of actual damages or $200, while the FDCPA provides for actual damages plus statutory damages of up to $1,000.
Under the State Act, the debtor may raise a counterclaim in any suit brought by a creditor or debt collector, relative to the debt collector or creditor violating the State Act. Upon proof of a violation by the debt collector or creditor, the court will award damages to the debtor-consumer, and will reduce the debt owed by the amount of the damages.
Consumers may seek remedies through a court action in either superior or small claims court for violation of the State Act, or in federal court for violation of the FDCPA. The statute of limitations (the time during which an action may be brought in court) under these statutes is different: no more than 3 years after the violation in state court and 1 year in federal court.
Points To Remember
If you are being contacted by a debt collector, keep a record of the dates, times, description of what was said or done, and the name of the person making the contact.
Whenever you need to communicate with a debt collector by mail, send the letter by certified mail, return receipt requested, and keep a copy of the letter for your files.
Where To Go If You Have A Problem
Contact the NH Consumer Protection and Antitrust Bureau if you have a problem with a debt collection agency in New Hampshire:
NH Consumer Protection and Antitrust Bureau
33 Capitol Street
Concord, NH 03301-6397
Contact the Federal Trade Commission if you have a problem with an out-of-state debt collection agency:
Federal Trade Commission
600 Pennsylvania Ave., NW
Washington, DC 20580
1-877-FTC-HELP or 1-877-382-4357 (toll free)
If you have a debt problem and would like the assistance of a credit counselor, contact the Consumer Credit Counseling Service of NH & VT (CCCS). CCCS is a nonprofit organization with offices in several cities across the state. Look in your local telephone book for the office nearest you, or call their toll-free number:
Consumer Credit Counseling Service of NH and VT
105 Loudon Road
Concord, NH 03301
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New Hampshire Department of Justice | 33 Capitol Street | Concord, NH | 03301