The PaymentVision Blog

What Is the FDCPA?

Obtaining timely payment for goods and services is essential to maintaining a healthy bottom line for any company. Debt collection provides a necessary function for reconciling delinquent and near-delinquent accounts. However, unscrupulous debt collection practices are all too common. The Fair Debt Collections Practices Act (FDCPA) is designed to protect consumers against abusive debt collection tactics while providing guidelines to reputable businesses for remaining in compliance while maximizing payment recovery by legitimate collection efforts.

What is the FDCPA?

The Fair Debt Collections Practices Act (FDCPA) is a set of regulations compiled by the Federal Trade Commission (FTC) to minimize abusive debt collection practices. The FDCPA includes guidelines regarding debt collection, including prohibited practices. The FDCPA also outlines violations and penalties imposed for violations by companies and individual debt collectors.

Origins of the FDCPA

The FDCPA resulted from congressional findings of rampant abusive and even fraudulent debt collection tactics. These abuses were also found to occur both locally and across state lines. This latter finding was instrumental in determining that a set of federal regulations were needed to complement existing state regulations, and provide additional consumer protections where gaps exist in state laws.

How Does the FDCPA Protect Consumers?

The FDCPA provides three areas of protection for consumers. First, the FDCPA outlines permissible and prohibited debt collection practices. This section of the FDCPA addresses when, where and how debt collection efforts may or may not take place. The FDCPA also includes prohibitions against abusive, misleading and fraudulent collections tactics.

Second, the FDCPA complements and supplements existing state laws regarding debt collection. In circumstances where state laws do not provide as much protection as the FDCPA (or none at all), federal regulations apply. By contrast, the FDCPA does not supersede state laws that are equivalent or which provide more protection for consumers than federal regulations.

Finally, the FCDCPA outlines procedures for civil legal actions available to consumers who have been subjected to abusive, deceptive or fraudulent debt collection practices. Administrative enforcement of penalties for FDCPA violations is also included in the act.

Consequences of FDCPA Violations

Debt collectors that violate the FDCPA may be subject to civil court action by individual debtors or class action lawsuits. Penalties for FDCPA violations include actual damages and additional damages, along with court costs and attorneys’ fees. Factors that influence the amount of damages awarded include the frequency of noncompliance, the extent of noncompliance and a determination of whether noncompliance was intentional.

What Can Debt Collectors Do to Ensure FDCPA Compliance?

Violation of debtor privacy is an area of rampant abuse by debt collectors. Unscrupulous debt collectors frequently attempt to embarrass debtors into making payments by contacting their workplaces, neighbors and other third parties. The FDCPA includes strict regulations intended to prevent such abusive practices  and protect consumer privacy.

In addition to refraining from abusive collection practices, debt collectors can ensure compliance with FDCPA regulations by implementing a bill payment system that offers payment tokenization. Payment tokenization substitutes a token for actual financial account data, which is stored in a secure remote vault. In addition to maximizing consumer privacy, payment tokenization reduces the risk of financial or identity theft, allows secure recurring payments and reduces the costs associated with Payment Card Industry Data Security Standard (PCI-DSS) compliance.

Debt collection is a legitimate function for recovery of delinquent and near-delinquent financial obligations. However, abusive, deceptive and fraudulent debt collection tactics are rampant. The FDCPA provides protections for consumers as well as guidelines for ethical debt collectors.

Protecting consumer privacy is an essential element of compliance with FDCPA regulations. Payment tokenization helps debt collectors remain in compliance with FDCPA privacy requirements while providing a secure means of arranging one-time and recurring payments. Contact PaymentVision today to learn more about FDCPA compliance.