Collection of Consumer Debts: the Fair Debt Collection Practices Act
In 1978 Congress passed the Fair Debt Collection Practices Act (FDCPA) in an effort to eliminate the abusive tactics used by unscrupulous consumer debt collectors. The Act also provides consumer debtors with a procedure for which they may dispute and obtain verification of the debt. New Jersey business owners need to be aware of its requirements.
The FDCPA applies only to consumer debt, which means that the debt was incurred primarily for personal, household, or family purposes, rather than commercial purposes. Therefore, collections against a corporation are not governed by the provisions of the FDCPA. Further, the FDCPA only restricts the conduct of “debt collectors” which includes only third-party collectors who regularly collect the debts of another, and does not include original creditors. Sheriffs are also not considered debt collectors. This means a New Jersey business owner trying to collect its own debt need not comply.
One question that is often raised is what constitutes “regularly” collecting the debts of another. There is no black and white answer and the courts have refused to set forth a hard and fast rule on the matter. For instance, in one case, the court found that a firm was a debt collector when four percent of its business was dedicated to debt collection, while in another case the court found that the firm was not a debt collector when six percent of its business was comprised of debt collection, partly because that six percent was met by a single case. It is ultimately determined on a case-by-case inquiry.