Debt Collection and Court Action

Leave Debt Behind - Fair Debt Collection Practices Act
Leave Debt Behind - Fair Debt Collection Practices ActWell, here’s another phone call from the debt collection folks and this time they’re threatening legal action.  This legal action – they say – will result in your wages being garnished or collected from your assets.

In reality, a debt collection cannot threaten to take you to court.  In fact, the collector is actually violating the law by doing this.  If they do, you can file a complaint against them with the government agency (in this, the Federal Trade Commission) that oversees the Fair Debt Collection Practices Act.

Fair Debt Collection Practices Act

This act is what covers everything from the time of day a collector can call to the debtors employer from prohibiting collection actions at work.  A complete overview of what can/cannot be done can be found here.   However, let’s talk a little more about legal and/or court action.
Here are some specific sections that are relevant.
  • Section 807(4) of the FDCPA states the following:  “The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sales of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.”
  • Section 807(5) states regarding false or misleading representations that, “The threat to take any action that cannot legally be taken or that is not intended to be taken.”
  • Section 807(7) should be an instant red flag is a creditor makes “the false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.”  (Nothing like having nightmares of the orange jumpsuit and a rather nasty cell mate while you’re in prison for failing to pay a $100 credit card bill!)

Legal Actions by Debt Collectors (Section 811)

If a debt collector attempts to bring any legal action regarding a debt, they must do the following:
  • Real Property.  Enforcement would be to obtain an interest in real property that is secure by you and only in the judicial district (or similar legal entity) where the property is located.
  • Authorization.  Just because this section of the code, “nothing in this title shall be construed to authorize the bringing of legal actions by debt collectors.  Construed means “to give the meaning or intention of.  This appears to mean that just because a debt collector can take legal action doesn’t mean they must.

Your Recourse

Well, just because this debtor has played (or attempted to play) all the cards in their favor, if they do something illegal, here’s the recourse you have.

  • Payment to reimburse you for the damages incurred..  For example, if you spent money to fight against the action, you can recoup any court filings or legal fees you paid.
  • Additional damages (with conditions) up to an additional $1,000.
  • Severity of the compliance by the debtor – e.g., how many times was the law broken, the number of people affected (and this is for class action lawsuits mostly), etc.

Unfortunately, if the debt collerctor can show the circumstances were unintentional (and they have lawyers to help them prove this – more than likely) the court may choose to not impose any punishment.

The moral of the story is do not get yourself to the point where legal action can be taken.  However, if you are in early talks with the debt collector, and legal action is being threatened, know that you can stop this – probably just by mentioning you know about the Fair Debt Collection Practices Act.