Deceptive or misleading collections tactics are strictly forbidden by the Fair Debt Practices Collections Act (FDCPA). The terms "deceptive or misleading", however, can be challenged if not defined. Some consumers have sued collectors for attempting to deceive them or coercing them to pay debts they do not actual owe. In a few recent cases, the letterhead made the debtor feel coerced or tricked into paying. What do the courts have to say about this?
How does letterhead make a difference in debt collections?
Misleading Collections Practices
Section 807 of the FDCPA prohibits false, misleading or deceptive collections practices. Some of these practices include:
- Falsely listing the status of the debt and/or how much is actually owed
- Falsely accepting compensation or services rendered as the collection of the debt
- Telling the debtor that they will go to prison or otherwise be arrested for non-payment
- Threatening legal action without the intent to actually take that action
- Imply that the consumer committed a crime
- Using a different name other than the name of the actual debt collector business or organization
That same section prohibits a debt collector from misrepresenting his or herself by using "false, deceptive or misleading representation or means in connection with the collection of any debt." It goes on to describe such false representation practices as:
- Falsely implying that the debt collector is "vouched for, bonded by, or affiliated with the United States or any State" by presenting a badge or uniform
- Falsely implying that the collector is an attorney or that the communication is from an attorney
- Identifying his or herself as a debt collector when they are not
- Using any documentation which falsely represents a court or official or agency of the State or the United States
The Importance of Letterhead
When a debtor receives a debt notice from an attorney or state attorney general, they may be willing to pay the debt without question and quickly. Some states do allow private debt collectors to use the state attorney general's letterhead when corresponding with debtors. Because of these practices, there have been several different lawsuits and court rulings.
- In May 2016, the Supreme Court issued a ruling that agreed if the collectors were recovering accounts owed to the state, they weren't falsely representing themselves by using the state attorney general letterhead.
- In March 2017, the Federal Trade Commission and the U.S. District Court for the Eastern District of Texas ruled against a collections agency that was using letterhead to identify itself as municipalities or government agencies. The agency does collections for various municipalities in several states and was also threatening that the consumer would be arrested for non-payment.
- In January 2017, the Consumer Financial Protection Bureau took action against a collections agency that not only sent letters on letterhead that claimed they were attorneys, they also called consumers and alleged that they were a law firm.
- The Supreme Court recently refused to take a case already decided by the D. C. circuit court in 2016 where a consumer claimed that a debt collector falsely represented themselves. The debt collector actually was an attorney but expressly stated that they were acting in capacity as a debt collector and that no attorney at the law firm was involved in the collection of the debt. The letterhead used was from the law firm but the collector did not state or threaten legal action.
Two other pending cases were examined on the InsideArm debt collections news website to collectors and collections agencies. While these cases have yet to be decided, collection agencies must be aware of the fine line of misrepresentation and misleading collections tactics that could end up in court.
The FDCPA was written to protect consumers from deceitful practices. Collections agencies who follow these regulations are also protected by them, helping to ensure successful recovery of debts, while remaining respectful to the customer. While it may be true that something as simple as letterhead can alert or frighten a consumer to pay faster, we believe in being honest and transparent. We believe educating the consumer makes them more willing to work with creditors and leads to higher recovery rates.