FDIC regarding Payday Loans

Dear :

Thank you for your correspondence regarding debt collection practices. The Federal Trade Commission enforces the Fair Debt Collection Practices Act ("fdcpa" or "Act"), which prohibits unfair, deceptive and abusive debt collection practices by collection agencies and other third-party debt collectors. It also gives you certain rights when you are being treated improperly by a debt collector. Although the FTC staff is not in a position to intervene on your behalf in resolving your problem, we would like to outline some of the provisions of the Act for you and explain how you can use it to avoid further distress. We note at the outset, however, that the Act generally does not cover either the collection of commercial debts or the collection activities of the party to whom you allegedly owe your debt (the creditor) so long as the creditor is collecting in its own name. The Act applies only to third-party debt collectors collecting consumer debts.

Congress enacted the FDCPA in 1977 in response to mounting evidence of the use of improper debt collection techniques in the marketplace. The Act prohibits several of these techniques, including, for example, disclosing consumers' debts to most third parties without the consumers' consent. It also forbids false threats to coerce payment (such as threats of suit or other actions when they probably will never occur) and any sort of oral harassment (such as threats of violence, profanity, and continuous calls) over the telephone. No calls may be made very early in the morning or late at night, calls to a consumer at work are restricted, and debt collectors may not add charges to the debt unless the consumer has agreed to them or they are permitted by state law. Finally, a debt collector may not sue a consumer outside the district (1) of the consumer's residence or (2) where the contract creating the debt was signed.

If you believe that you do not owe the debt, you may file a dispute with the debt collector. If you do so in writing within thirty days of the date the collector notifies you of this right, the Act requires the collector to stop all collection efforts until it provides you with written verification of the debt. The Act also specifies that the debt collector inform you of this requirement at the beginning of the collection process. If you were not so informed, the collector violated the law.

Instead of filing a dispute, you may choose to send them a letter demanding that the debt collector cease all further collection efforts. If you do so in writing, the Act requires that the collector comply with the demand. We suggest that you send the letter by certified mail, return receipt requested, and keep a copy for your records. Please note, however, that sending a cease communication letter does not prevent the debt collector or the creditor from filing suit against you. It does, however, prevent them from calling you and sending collection notices.

If you believe that the debt collector that is contacting you violated the law in this or any other way, you may additionally:

1) File a complaint with your state or local consumer protection office and/or the party to whom you originally owed the debt (the debt collector's client). If you file a complaint, describe the circumstances in detail and send copies of all written materials received from the collector. Any of these parties might take independent action against the collector.

2) File a private suit against the debt collector in any court for violations of the Act and, if you are successful, receive actual damages, attorney's fees, and additional damages up to $1,000.

Remember, however, that the Act does not function to erase a valid debt, even if a debt collector has violated the law in attempting to collect it from you. If you really owe the debt, you will still have to cope with the consequences of non-payment if you do not pay. Remember also that some collection techniques, while unpleasant or distasteful, are not law violations. For example, a debt collector may:

1) Contact third parties solely to determine where you are, so long as the collector does not disclose the existence of your debt.

2) Contact you at work if the debt collector has no reason to believe that your employer prohibits the contact (and you have not filed a cease-communication request).

3) Use a rude or angry tone on the telephone, if the overall communication with you cannot truly be characterized as abusive or harassing.

4) Threaten consequences of non-payment that are truthful. For example, debt collectors may threaten to sue if suit will, in fact, be the result of non-payment. They also may threaten to report your debt to a credit bureau if, in fact, they intend and are legally able to do so. It is to your advantage to know the probable result of withholding payment, if it is accurate.

5) Accept or solicit a post-dated check, if the collector does not deposit it before the date on the check.

6) Refuse to accept a partial payment for a debt (even if you had such an arrangement with the creditor). If there is more than one debt, the collector must credit the account that you designate.

If you owe the debt, we suggest that, before you resort to some of the stronger measures outlined above, you try to work out any payment difficulties, first with the debt collector and next with your creditor. Finally, if you decide to proceed further, or if you think that the collector or creditor is about to take legal action against you, be sure to contact your local legal aid office or an attorney for advice.

Like the FDCPA provisions discussed above, you may also find certain Fair Credit Reporting Act (FCRA) provisions helpful if you believe that a debt collector is providing inaccurate information about you to a credit bureau. To fully protect your rights under the FCRA, we strongly recommend that you dispute the credit report item in writing to both the credit bureau and the debt collector. When you dispute the item to the credit bureau, the FCRA requires that the credit bureau pass your dispute to the debt collector, along with all relevant information you provided. The debt collector must investigate the dispute (which includes a review of the information you provided) and report what it found to the credit bureau within thirty days after you first disputed the item to the credit bureau.

During this same period, the credit bureau must also review the information you provided. If the debt collector reports that the credit report item is incorrect and should be deleted, or fails to report to the credit bureau at all within the thirty-day period, the credit bureau must delete the item from its files. If the debt collector reports that the item is inaccurate and should be changed to a less delinquent status (e.g., 30 days late, rather than 120 days late), but not deleted, the credit bureau must make that change in its files.

We hope that this information has been helpful to you. Please be assured that we are always interested in reports of law violations. If we cannot act immediately to remedy them, we will retain whatever you have provided for possible use in future enforcement actions. The efficacy of our FDCPA enforcement program is largely dependent upon information we receive from individuals like you. Thank you for writing.



Sincerely yours,


Consumer Response Center