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  COLLECTION LAWYER

Multiple Agencies or Creditors Collecting on the Same Account

Published: Monday, August 21, 2006

Section 807 of the FDCPA states, "A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." Congress intended this section to be particularly broad, encompassing any potential violation, including those not specifically addressed by the Act. Because this section of the statute is so broad in nature, collection agencies need to be careful not to engage in any practices that could be viewed as false, deceptive, or misleading to the consumer.

Both creditors and collection agencies play an integral role in ensuring compliance with Section 807. Section 807(2)(A) specifically states that a debt collector may not engage in "[t]he false representation of the character, amount, or legal status of any debt." When forwarding an account for collection, it is important for creditors to place the account with only one agency. If more than one collection agency attempts to collect a debt, the consumer will not only be confused as to which entity is actually collecting the debt, but payments made on the account will likely be credited only with the agency that received payment rather than with all agencies collecting the account. Further, collection costs added to the balance of the debt are presumably different at each agency, based on the terms of the contract between the collection agency and the creditor.

If a creditor continues to collect on an account even after it has been forwarded to a debt collector, the consumer will likely be confused as to whether the account is in collections and who to contact for payment, complaints or other inquiries. With the creditor continuing to pursue the account, the amount of the debt may be misrepresented because the collection agency is seeking collection costs while the creditor is not. Consequently, if more than one entity at a time collects an account (either multiple collection agencies or a collection agency and a creditor), misrepresentation of the debt is bound to occur, as payments may not be credited by all the parties seeking collection and the amount owed may be different at each agency.

Creditors and collection agencies should exercise caution to ensure that only one entity engages in collection activity on a given account. Because of the potential to mislead or confuse consumers and potentially violate Section 807 of the FDCPA, creditors should cease any internal collection activity when forwarding an account to an agency for collection. Likewise, a collection agency should cease any collection activity when forwarding an account to another collection agency, or when returning the account to the creditor.

ACA members logged in to ACA Online may download a copy of this article by requesting document #432 from E-Compliance.

This article is provided as a service of ACA International's Legal and Government Affairs Department.