The Fair Debt Collection Practices Act (“FDCPA”) is a set of federal laws designed to protect consumers from abusive, deceptive, or otherwise unfair actions by debt collectors. The law allows consumers to file lawsuits against debt collectors for violations for both their actual damages and statutory damages of up to $1,000 per violation. For this reason, it’s extremely important to know whether the FDCPA applies to your business so that you can ensure compliance with the law.

What Creditors Are Covered Under the FDCPA?

The FDCPA was passed to control the actions of third-party debt collectors. These are the agencies that are remembered most for past, and sometimes still present, practices of constant and abusive phone calls. Original creditors, such as a credit card company, auto loan lender, cell phone company, or other business that provided the product or service purchased with debt, are not covered.

The key distinction is generally whether or not a debt was purchased. If a business purchases debts and tries to earn money based on what it can collect, the FDCPA typically applies. If a business does not typically collect debts other than those that are directly owed to it or an attorney or other agent is acting as a direct representative of that business, the FDCPA will usually not apply.

If the FDCPA Doesn’t Apply, Can It Be Ignored?

The FDCPA may not apply to your business, but it is still a good practice to follow it. First, state debt collection laws likely prohibit many of the same actions and may apply to a wider range of businesses. Second, consumers may still be able to bring lawsuits for harassment, liable, or overcharging interest or fees based on general common law even when specific debt collection laws do not apply. Finally, whether or not your business’s actions are legal or subject to a lawsuit, you don’t want anyone collecting debts on your behalf to do anything that could tarnish your reputation if the debtor posts about it on review sites or social media.