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Debt Collection Practices
by Howard S. Goldman, Esq.

 
Despite a strong urge to seek payment for goods and services promptly and professionally delivered, a creditor must proceed with caution at debt collection because of the federal and state regulatory protections afforded debtors*. Collection practices that are deemed unfair and deceptive may result in judicial assessment of punitive damages, attorney's fees, and recovery for emotional distress. More and more debtors are turning to the courts and to the office of the Attorney General to remedy unfair debt collection practices.

Types of Debts Covered by Statutes
The Statutes prohibit collection or attempted collection in an unfair, deceptive, or unreasonable manner of a debt incurred primarily for personal, family, or household purposes. In other words, consumer debt, not business debt, is covered. Examples of covered debts are automobile loans, condominium common areas fees and charges, phone and utility bills, and unpaid rental, all arising from personal use.

Specific Prohibitions

  • Unfair, deceptive and unreasonable collection practices are prohibited by the Statutes. Examples of such prohibited conduct are:
  •   Certain communication to persons other than to the debtor (i.e. an employer);
  • Embarrassing or harassing letters or telephone calls (i.e. obscene language);
  • Threatening any action which the creditor does not intend to implement (i.e. threats of criminal prosecution or arrest for non-payment);
  • Communication with the debtor by forms that simulate judicial process;
  • Excessive or inappropriate communications with debtor (i.e. telephoning before 8:00 am or after 9:00 pm);
  • Request for a post dated check in most cases.

Actions of Creditors' Agents
The Statutes prohibit any creditor or his agents, employees or attorneys engaged in collecting the debt from unfair debt collection practices. Collection agencies and collection lawyers are equally prohibited from unfair collection practices.

Debt Validation/Compliance
The Statutes require that within five days after the initial notification, the debt collector shall send the debtor written notice containing:

  • Amount of the debt;
  • Name of creditor to whom debt is owed;
  • Statement that unless consumer within 30 days disputes the validity of the debt or any portion thereof, the debt will be assumed to be valid;
  • Statement that if consumer notifies the debt collector in writing within the 30 day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification and mail same to the consumer.

Although no written notice is required prior to commencing a lawsuit, if such written notice is given, no lawsuit can commence in the context of a disputed debt until written verification of the debt has been forwarded to the consumer.

Venue for Legal Action
Any legal action to collect a consumer debt except for a debt secured by real estate, must be filed in the judicial district (a) where the consumer signed the contract sued upon, or (b) where the consumer resided at the commencement of the action. Such venue restriction has a dramatic impact on an attorney's ability to select the legal forum based on his convenience and his preference for a particular court due to favorable judicial treatment.

Penalties
Any debt collector who fails to comply with the Statutes shall be liable for:

  • Actual damages sustained by the consumer;
  • An amount assessed by the court not to exceed $1,000;
  • Attorney fees and costs;
  • Multiple damages pursuant to MGL 93A, including emotional distress
  • Damages from counts for defamation, invasion of privacy, wrongful foreclosure.

However, a debt collector may avoid liability by proving that the violation was not intentional and resulted from a bona fide error.

Summary
Creditors, including debt collectors and attorneys, must proceed prudently in collecting consumer debt by complying with the applicable state and federal debt collections statutes and regulations. Such debt collection conduct must not be unfair or deceptive and all written communications must present clear and exact statements documenting the debt and identifying the creditor. Harassing and excessive communications should be avoided. A competent debt collector should be consulted to avoid assessment of punitive damages and an award of attorney fees.

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