Recent statistics suggest that more than 1 in 4 Americans has a debt in collections. Consumers file thousands of complaints about debt collectors with the Consumer Financial Protection Bureau, the federal agency which regulates financial institutions.
Debt collection agencies were sued more than 6,000 times in 2020. That number was below normal levels, due to the COVID-19 pandemic. In short, there are serious problems with the debt collection industry.
Most lawsuits against the debt collection industry are based on a law called the Fair Debt Collection Practices Act (known as the FDCPA). This federal law, first passed in 1978, regulates the conduct of debt collection agencies.
Amongst it’s many provisions, the FDCPA restricts the hours when a collector can contact you, what they may say in their collections efforts, and how they may report information on your credit reports. What If a collection agency violates these rules?
You may be entitled to up to $1,000 in damages, and to have your attorney’s fees and court costs paid for by the collection agency. This means that if an attorney believes you have a viable FDCPA case, they’ll typically take the matter, free of charge.
We’re going to review a specific provision of the FDCPA. This allows you to sue collections agencies, based on the contents of envelopes they send you. Let’s dive in.
What Debt Collectors Can & Cannot Say On Collections Envelopes
§ 804 of the FDCPA says that a debt collector cannot “..use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt.”
We, and some other consumer rights attorneys, like to call this the “Envelope Rule.” How does the Envelope Rule work?
Let’s say you’re receiving phone calls from a debt collection agency named ABC Collection Services. Let’s also assume that ABC Collection Services is writing you letters. The name “ABC Collection Services” clearly indicates that this company is in the business of debt collection.
Now, suppose you recieve the following letter, with the address below listed as the sender on the envelope:
ABC Collection Services
12345 Main Street
Frisco, TX 75033
By putting their name on the envelope, when that name makes it clear the letter is from a debt collection agency, ABC Collection Services has very likely violated the law. If ABC Collection Services left their name off the envelope, and merely included the address, they’d have been in compliance with § 804.
Let’s try another example. Suppose that ABC Collection Services had left their name off the envelope, in compliance with the FDCPA. They only listed their address.
However, on the front of the envelope the wrote “Settle Your Account For Half Off.” That is, they’re willing to resolve your collection account for 50% of what is owed.
While ABC did not violate the law in terms of addressing the collection to you, putting “Settle Your Debt For Half Off” on the envelope definitely indicated that “the communication relates to the collection of a debt.” There are not many other ways to interpret a statement about settling debt.
Sometimes, you might not be sure whether a collection agency violated the law. If that’s the case, keep reading.
What To Do If You Believe A Collection Agency Violated The Envelope Rule
If you believe that a collection agency violated the Envelope Rule, there are several steps you must take. It is important that these steps be taken carefully, and in order.
1. First, you must set aside the collection envelope (and letter contained in the envelope) in a safe place. Be sure to also take a photo / scan of the envelope and letter. The original letter (and a copy) is quite important in litigation. Without it, you might not have a case.
2. Next, it is time to contact an attorney, and see if you have a case. There are multiple ways you might search for an attorney.
The National Association Of Consumer Advocates (known as NACA) offers a directory of consumer attorneys, by state and practice area. NACA attorneys have typically gone through a bit of vetting and a screening process.
Avvo is another place you might look for attorneys to work with. Keep in mind that since attorneys can pay for exposure on Avvo, you want to take that into account when using the platform.
Lastly, you’re welcome to contact us at Tier One Credit. We work with a national network of consumer attorneys, who handle FDCPA and FCRA cases nationally.
3. If you have a case, it’s now time for the attorney to file a lawsuit, and take the case forward. Since the FDCPA is a federal law, most FDCPA cases are filed in the appropriate federal court (based on where you live). There are state laws which protect against harassment by debt collectors (such as in California), but for the most part, these cases involve federal law.
Here is something important to keep in mind: Bringing an FDCPA case costs you nothing. You see, the FDCPA also states that if you win an FDCPA lawsuit, the court costs and fees of your attorney (up to a reasonable amount) must be paid by the debt collector. The FDCPA also allows you to recover up to $1,000.
We should note that most Envelope Rule cases don’t result in a trial. These cases tend to settle out of court. Typically, the collection agency will pay you $1,000, and pay your attorney’s fees.
They’ll often also agree to remove the collection from your credit reports, and cease collections efforts on the debt. This means that your credit score may improve, and you probably won’t hear from this collector again.
However, we should note that this does not mean you don’t owe the debt. The debt will be sent back to the original creditor, i.e. the party whom you owed money to. This might be a doctor’s office, a credit card company, or a cell phone provider.
The original creditor can hire a different debt collection agency, to collect on the debt. This means that collections on the debt could resume, and the debt might once again appear on your credit reports.
An FDCPA lawsuit doesn’t mean that the original debt is wiped out. However, it’s quite helpful for removing collections accounts from your credit reports, and stopping harassment by a debt collector.
The Final Word
As you can see, debt collection agencies frequently violate the law. Making it obvious (by mail) that you’re being contacted by a collection agency, is wrong and illegal. If you’re receiving mail from collection agencies, you should check for violations of the Envelope Rule.
More broadly, you might want to have a consumer rights attorney review any communications you’re receiving from a debt collection agency, and see whether you have grounds to sue. You never know what they might find. More broadly, if you’re looking to stop harassment from collections agencies, please feel free to reach out to us. We’d love to help in any way that we can.
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