Understanding the Fair Debt Collection Act

Written by: Pam Gaulin

Businesses have the right to attempt to retrieve money owed to them on past due accounts. State debt collection laws and the federal Fair Debt Collection Practices Act (FDCPA) govern how businesses can legally collect debt. The Fair Debt Collection Act exists to protect consumers and set parameters for debt collection.

Businesses that need to collect money on overdue payments can protect themselves by learning about the Act or by working with an experienced collection agency that is well versed in the laws and any recent changes that emerge.

What is the Fair Debt Collection Act?

The Fair Debt Collection Act, enacted in 1977, serves to protect consumers from debt collection service abuses or threats. This includes receiving calls at work when they are prohibited by the workplace and other invasions of privacy.

State-specific debt collection laws

Many states have their own laws governing how and what can be done to collect debts without overstepping consumer debtors’ rights. Some are specific to fair debt collection while others specifically prohibit certain collection practices. In addition, there are certain mandates that help protect consumer privacy.

State laws also govern the statute of limitations on debt collection. In some jurisdictions, the debt may not be collected two years after the debt was written off. Other states have statutes of limitations as long as 15 years.

Due to varying statutes of limitation from state to state, businesses with customers in more than one state should shop around for a collection agency that is most familiar with frequently-updated state debt collection laws as well as the Federal Fair Debt Collection Act.

Fair Credit Reporting Act (FCRA)

Debt collection laws also work alongside the Equal Credit Opportunity Act and the Fair Credit Reporting Act (FCRA). The Fair Credit Reporting Act (FCRA) governs a consumers' credit report, which may be used to evaluate their credit worthiness when applying for a mortgage, car loan, or any other lines of credit.

Debt collection act and past due accounts

The most effective for a small business to deal with past due accounts under legal parameters is to find the right collection agency to help collect the money owed to you. Meet with each agency you research to discuss concerns you have about legal debt collection practices. This will provide you with insight into each agency’s knowledge depth before you choose one based on your specific needs.

Since debts have a better chance of being recovered within the first 90 days and in turn have a less likely chance after 120 days, it's important to make debt collection attempts quickly. By acting fast, the contact information you have on the debtor stands a good chance of being accurate.

Note that the Fair Debt Collection Practices Act prohibits collection agencies from placing unwanted calls to work or discussing debts with a third party. Make sure the agency you select institutes best practices in their debt collecting actions.

To get matched with multiple collection agencies that are well schooled in the Fair Debt Collection Act, submit a free request for collection services price quotes.