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You may have heard and read about debt collection agencies. The agencies are tasked with collecting money from borrowers who haven’t paid their debts in time. It is not uncommon to hear of hundreds of consumers in the United States complaining of being harassed because they owe other people, or businesses, money. The Federal Trade Commission through the Fair Debt Collection Practices Act (FDCPA) of 1977 stipulates specific rules and regulations that protect defaulters from third-party collection agencies.

Rules and regulation

FDCPA prohibits debt collectors from inappropriately contacting borrowers, and using threats or excessive force to recover debts. Simply put, no one who owes money should be harassed, regardless of the amount in question, or the time the debt has passed its due date. The law blocks debt agents from using deceptive and unfair practices to collect money or goods from borrowers. Although the law is unambiguous on collection enforcement actions, some debt collection companies don’t play by the rules, causing numerous complaints. The Consumer Financial Protection Bureau (CFBC) collected approximately $80 million in fines from agencies who broke the law when collecting debts. CFBC returned more than $360 million to consumers.

The law allows borrowers to work with not-for-profit debt counselors, and debt management organizations, to come up with appropriate repayment plans. No collection agent should call a consumer before 8 a.m. or past 9 p.m., or call their workplace without authorization. FDCPA also forbids collectors from threatening consumers with legal action and collecting more than the debtor owes. On a final note, the agencies must provide proof of payment violation. Debt collection companies can’t use misleading correspondence to make the borrower cover an overdue account. The collector can’t chase a defaulter who has filed for bankruptcy. Consumers have a right to sue debtors if the latter breaks the law.

The Key Takeaways for FDCPA

Debt collection can be difficult for small and medium-sized businesses and is one of the main causes of business failure in the U.S. The Fair Debt Collection Practices Act (FDCPA) has even worsened the situation because it protects borrowers from creditors and third-party debt collectors. If you manage a small or medium-sized business, you must devise strategies that are in line with the FDCPA during before you embark on recovering owed monies. Otherwise, you may be doing yourself more harm than good, and it won’t take long before you, together with your favorite collection agency, pay fines.


To ensure that you abide by the FDCPA rules and regulations, avoid harassing those people who owe you money, keeping messages and phone calls short and precise. Don’t threaten a customer, or you may lose them and still end up facing legal challenges. Write letters to your debtors and save copies of the sent letters. These documentations are called demand letters and may be helpful when approaching collection agencies. You may find it necessary to hire a collection agency to write the demand letters if you think that your writing is not consistent with rules stipulated in the FDCPA. Debt collection agencies are experienced in such matters and may use the letters as proof of payment violation.

As a small business owner, you may have realized that it’s common practice-when collecting debts-to settle for less than what is owed. There are customers who are in difficult situations and show no hope of paying the debts, so go for the small amount and write a legal document to show that consumer offset the debt with a payment that’s less than due. If these solutions don’t help, consider going to a small claims court, which is affordable and suitable for small businesses, to sue the debtor.

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