Advocates Pushing Back on FTC Proposal Over Debt Collection from Dead People

The Wall Street Journal is reporting some consumer advocates are a bit flummoxed over a recent proposal by the FTC regarding diminished legal liability for debt collectors that chase people to pay the debt of dead people.

“The plain language of the Fair Debt Collection Practices Act does not allow collectors to contact friends, neighbors or relatives except to obtain contact information for debtors,” said Robert Hobbs, a lawyer and debt-collection expert for the National Consumer Law Center. “This proposed rule could open the door for collectors to seek money by prodding and misleading grieving relatives and friends into thinking they have obligations that they don’t.”

“The collector first has to identify who that person of responsibility is,” Joel Winston of the FTC said. Many collectors send a letter to the deceased person’s residence and say the person owed this debt and whoever opened the letter has to pay it.

“Under this policy they can’t do that anymore,” he said. “They have to ascertain who the right person is to connect to and only then can they try to collect the debt.

“That should protect people from getting contacted out of the blue through a phone call or letters from some debt collector,” Winston said.

Moreover, the proposal requires the collector to make it clear that the consumer doesn’t have a personal obligation or liability to pay the debt, Winston said.

“If the money is gone, the money is gone,” he said. “Relatives shouldn’t feel bad that something will happen to them if they don’t pay the debt.”

The Federal Trade Commission is seeking public comment on a proposed policy statement clarifying when the FTC will take action under the Fair Debt Collection Practices Act (FDCPA) and the FTC Act against companies trying to collect the debts of deceased consumers.

In collecting these debts, the FDCPA generally allows collectors to contact only the decedent’s spouse, or the executor or administrator of the decedent’s estate. Since the FDCPA was enacted in 1977, state probate laws have expanded the types of persons who are authorized to pay a decedent’s debts from assets in the decedent’s estate, beyond the categories expressly permitted under the FDCPA. In the proposed enforcement policy statement issued today for public comment, the Commission seeks to reconcile the FDCPA’s requirements with state probate law developments.

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Under the proposed policy statement, the FTC would not take law enforcement action alleging that a collector violated the FDCPA by communicating about the decedent’s debts with the decedent’s spouse, the executor or administrator of the decedent’s estate, or anyone else who is authorized to pay the debts from assets in the decedent’s estate. The statement also provides guidance about what collectors must do to identify persons with whom they may communicate about paying the decedent’s debt without improperly revealing the debt to others. In addition, the statement emphasizes that, in communicating with someone who is authorized to pay the debts from assets of the decedent’s estate, collectors must avoid creating the misleading impression that the person is personally liable or could be required to pay using his own assets or assets held jointly with the decedent. The proposed statement notes that to avoid this misleading impression collectors may have to disclose that this is not the case.


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