If an institution is collecting delinquent loans that it owns or services for third parties, it does not fall within the definition of debt collector and the provisions of the Fair Debt Collection Practices Act do not apply to it. Also, the FDCPA does not apply to the collection of commercial loans.
That said, the Consumer Financial Protection Bureau and the other bank regulators have suggested that even if an institution activities do not cause it to fall within the definition of debt collector under the FDCPA, if those activities are in contravention to the prohibitions of the Act, they may be considered to be unfair, deceptive or abusive and a UDAAP violation. Because of that, the personnel in an institution that is not a debt collector who are responsible for collecting obligations owed to the institution need to be aware of the prohibitions of the FDCPA and avoid any consumer contact that contravenes those restrictions.
First, FDCPA restricts the time and place that the consumer may be contacted. The consumer may not be contacted at an unusual time or place or at a time inconvenient to the consumer. In particular, contact may only be made between 8:00 A.M. and 9:00 P.M. local time. If it is known that the consumer is represented by an attorney, no contact may be made with the consumer without the attorney’s consent. The consumer may not be contacted at his or her place of employment if there is reason to believe or it is known that the employer prohibits such contact. Also, there may be no further contact with the consumer if the consumer says that he or she wants no further communication.
A debt collector may not communicate the existence of the debt to third parties other than its attorney or a credit bureau. For example, if you are trying to collect a debt that I owe you, you may not contact either my employer or neighbor, or anyone else for that matter, and say that you are trying to collect a debt that I owe and how can you make contact with me. Likewise, you cannot send me a collection notice on a post card or place a legend on the envelope of a collection letter that the purpose of the letter is to collect a debt.
In your communication with a consumer, you may not make any threat of violence. For example, you could not indicate that persons who do not pay their debts to you frequently and mysteriously suffer broken bones. You may not use profane or abusive language. You may not make frequent telephone calls to the past due consumer with the intent to annoy, abuse or harass the person, and you may not call the person without revealing your identity as a person attempting to collect a debt.
Finally, in your communications, you may not make any false, deceptive or misleading representations. You can tell a consumer the legal actions that you will take but, for example, you could not tell the consumer that if he or she did not pay immediately he or she will go to jail. Years ago when I worked for a bank, the collections activity was a part of my responsibility. I came up with the idea of the second page letter when we had someone that would not respond to our attempts to contact them. What the second page of the letter said, in essence, was that if the person did not contact us immediately we would take all of the steps outlined on page one of the letter. There was no first page. We would send the person only the second page. The fear of the unknown frequently caused the person to contact us. I think that practice is legal, but it may be border line; and certainly today, with so much UDAAP scrutiny, I would not recommend it.
Very few financial institutions fall within the FDCPA’s definition of debt collector, but almost all financial institutions have debts that they must collect from time to time. Make sure that the persons in your institution have a working knowledge of the prohibitions of the Fair Debt Collection Practices Act and that they are complying with them.