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Fair Debt Buying Practices Act Goes In Effect Soon!

The Fair Debt Buying Practices Act was passed on July 1, 2013. It will require purchasers of charged-off consumer debts to provide greater documentation and to inform debtors of their rights. Typically, debt buyers purchase defaulted consumer debts by the thousands for pennies on the dollar. Debt buyers then file a large volume of lawsuits on the alleged debts and claim to be the assignees of the debts. These debtbuyers prey on the uninformed and unrepresented.

They proceed with lawsuits in hopes that the consumer will not show up and then seek the entry of a default judgment. Once the default judgment is obtained, debt buyers proceed to collect on the judgment by levying bank accounts, garnishing wages, and foreclosing on real estate. This is regardless of whether the debt collection efforts were directed at the wrong consumer, for the wrong amount, or state time-barred debts no longer collectable due to statute of limitations.

Consumer Debt Purchased After January 1, 2014

The Act applies to consumer debt purchased after January 1, 2014. It applies to “debt buyers”, defined as a “person or entity that is regularly engaged in the business of purchasing charged-off ‘consumer debt’ (for personal, family or household purposes) for collection purposes, whether it collects the debt itself, hires a third party or hires an attorney for collection litigation.”
 

Key provisions of the Act require:

1. Debt Buyers to provide documentation showing:
a. The debt buyer’s ownership of the debt (i.e. its authority to collect on the debt, such as a contract or document evidencing the debtor’s agreement to the debt).
b. The debt balance at charge-off.
c. The date of the default or last payment.
d. The names and addresses of the creditors at charge-off and of the debt buyer (and any other purchasers).

2. Debt Buyers must inform debtors of their right to request the required documentation and upon receiving a debtor’s request must provide the information within 15 days. Additionally, written collection demands must notify the debtor of the consequences of nonpayment – whether, in particular, the debt is time-barred and whether it may be reported to the credit agencies under the Fair Credit Reporting Act.

3. All settlement agreements between a debt buyer and a debtor must be documented in open court or in writing.

4. A debt buyer who receives payment on a debt must, within 30 days, provide a receipt or statement showing the date, and amount paid, among other things.

5. A debt buyer is prohibited from initiating a suit to collect a debt if the statute of limitations on the cause of action has expired.

6. The Act prescribes penalties for each violation and provides that its provisions may not be waived. Penalties for violation of the Act in an individual action includes actual damages and statutory damages between $100.00 and $1,000.00, plus attorney fees.

Fair Debt Buying Act

The Fair Debt Buying Act is a step in the right direction in helping consumers fight debt buyer collection abuse. It is a start towards addressing the problem that the Federal Trade Commission called, the “broken” debt collection litigation process. It will not only aid consumers, but the courts that are inundated with collection law suits. It discourages the use of false or confusing claims and reduces the number of unmeritorious claims that are crowding our judicial system.

If you have been served with a lawsuit by a debt buyer or are being harassed or threatened by one, contact Doan Law Firm immediately for your free consultation. We are here to help protect your rights and we understand how burdensome debt related issues can be.

Written by Michael G. Doan

 Owner of the Oceanside Bankruptcy Attorney office, Michael not only manages his business, but is also a highly skilled San Diego Bankruptcy Attorney with over 20 years of experience. He specializes in many fields, such as: insolvency, bankruptcy, consumer rights, debt negotiation, creditor collection abuse, estate planning, contracts, real estate, and tax. Michael is currently concentrating his practice solely in Bankruptcy Law and is a Board Certified Specialist in Consumer Bankruptcy Law by the American Board of Certification, one of only fourteen such attorneys in all of California. Mr. Doan also practices on the cutting edge of bankruptcy law, and was the first attorney in the entire Southern District of California to file the very first Chapter 7 Bankruptcy and very first Chapter 13 Bankruptcy under the new Bankruptcy Laws which went into effect on October 17, 2005.

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