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The Fair Debt Collection Practice Act Law

Navigation:  Home > Tax Law > What is the Fair Debt Collection Practice Act Law


Collection agencies are used as a last resort by creditors to collect money owed to creditors. Collection agencies have to be licensed. Collection agencies are regulated by both the state and federal government. Federal and state law defines a collection agency as a business or organization whose principal purpose is the collection of debts, specifically the Fair Debt Collection Practices Act (FDCPA).

Under the FDCPA, a debt collector must identify him or herself, not communicate with any person more than once unless requested to do so by the consumer, not communicate by post card, not use any symbols or language on letters indicating it is from a collection agency, and if the consumer has an attorney, not talk to anyone but the attorney. A collection agency cannot call you at home before 8:00 a.m., or after 9:00 p.m., and may not call you at work if they know your employer bans such calls. And obscene, profane, or abusive phone calls are prohibited.Finally, if a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt.

Under the FDCPA, if the debt collector violates any of the above laws, you have the right to sue, and can receive up to $1,000 per violation. Third-party collection agencies often work on commission, where they receive a percentage of the amount that they collect. Some agencies also purchase large groups of charged-off bad debts for a small percentage of the face value. After a debt is sold, the debtor now owes the full amount to the purchaser. Since the chances of recovery decrease substantially with time, an agency might only pay 1% - 5% of face value.

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