The Fair Debt Collection Practices Act (FDCPA) is a well-known federal statute that governs the debt collection industry. It provides protection for consumers who have been “harassed” by debt collectors. (“Protection” meaning: monetary damages, injunctions, etc. for violating provisions of the FDCPA.) While many feel that the FDCPA is too broad, ambiguous, and overbearing, similar state statutes can be even more onerous. Take, for example, the Florida Consumer Collection Protection Act (FCCPA). The acronym is similar, but the damages a creditor could face for a violation are considerably more severe.
It is a common tactic of consumer attorneys to sue debt collectors under both federal and state consumer protection laws. One bad letter, they claim, violates two sets of laws — state and federal. Their aim is to double their possible payday. Consumer attorneys may also claim a single incident violates multiple provisions of the FDCPA and state law. This makes their claims contradictory at times, but still requires a defense.
Generally, federal law allows states to pass statutes that are more protective than their federal counterpart. In some respects, the FCCPA provides more protection to consumers than the FDCPA. The purpose of this blog is to help you understand that distinction.
Who is Liable?
The FDCPA has limitations on its authority. Most important is that the FDCPA only governs “collectors.” A collector is loosely defined as a person or entity who purchased the debt or is hired to collect a consumer debt for the creditor. What’s the important exclusion? Debt originators (i.e. original creditors) are not “collectors” under the FDCPA, and are therefore not covered. In other words, if your financial institution is the original creditor on a loan to one of your consumers, it cannot be found liable for violating the FDCPA for its actions relating to collecting the debt because the credit union is not covered by the law.
However, under the FCCPA, all creditors can be found liable for damages, including original creditors. The definitions of the FCCPA are more broad and do include creditors directly. If a consumer is in debt collection and files a lawsuit against your credit union (or other financial entity), it may be able to escape liability under the FDCPA, but the portion of the case filed under the FCCPA will usually go forward.
How Do Damages Differ?
How much could your institution face as a damages claim? Under the FDCPA, damages are capped at $1,000 per claim, plus actual damages and attorney’s fees. The FCCPA differs in that it also specifically permits punitive damages. Assuming the debtor/plaintiff can show conduct that would result in the award of punitive damages, the damages they can have assessed against your company are virtually unlimited. One court awarded $22,000 in damages (mixed between FDCPA/FCCPA), of which $10,000 was punitive under the FCCPA (Barker v Tomlinson, 2006 WL 1678645, Middle District of Florida, 2006).
While the threat of punitive damages is a concern, keep in mind that they can only be awarded if the alleged conduct rises above the standard of willfulness, to the level of malicious intent. Put another way, the conduct must “evidence a purpose to inflict insult and injury, or be wholly without excuse.” (Story v JM Fields, 343 So. 2d 675 (Fla First DCA 1977). The bottom line is that while punitive damages are a factor, unless the conduct is really out of control it is not a realistic threat.
In our experience, almost all creditors strive to comply with the FDCPA. If you do that, then you are generally in compliance with the FCCPA as well, thus mitigating your potential liability greatly. If you would like to know more about these distinctions, give us a call at 904-363-2769. The attorneys at Hiday & Ricke are very experienced with the FDCPA and FCCPA, and interested in helping you with your compliance program.