UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Federal Trade Commission
December 23, 1997
Robert G. Cass
Compliance Counsel
Commercial Financial Services, Inc.
2448 E. 81st Street, Suite 5500
Tulsa, OK 74137-4248
Dear Mr. Cass:
Mr. Medine has asked me to reply to your letter of October 28,
1997, concerning the circumstances under which a debt collector
may report a "charged-off debt" to a consumer reporting
agency under the enclosed Fair Debt Collection Practices Act.
In that letter, you pose four questions, which I set out below
with our answers.
I. "Is it permissible under the FDCPA for a debt
collector to report charged-off debts to a consumer reporting
agency during the term of the 30-day validation period detailed
in Section 1692g?" Yes. As stated in the Commission's
Staff Commentary on the FDCPA (copy enclosed), a debt collector
may accurately report a debt to a consumer reporting agency within
the thirty day validation period (p. 50103). We do not regard
the action of reporting a debt to a consumer reporting agency
as inconsistent with the consumer's dispute or verification rights
under § 1692g.
II. "Is it permissible under the FDCPA for a debt
collector to report, or continue to report, a consumer's charged-off
debt to a consumer reporting agency after the debt collector has
received, but not responded to, a consumer's written dispute during
the 30-day validation period detailed in § 1692g?"
As you know, Section 1692g(b) requires the debt collector to cease
collection of the debt at issue if a written dispute is received
within the 30-day validation period until verification is obtained.
Because we believe that reporting a charged-off debt to a consumer
reporting agency, particularly at this stage of the collection
process, constitutes "collection activity" on the part
of the collector, our answer to your question is No. Although
the FDCPA is unclear on this point, we believe the reality is
that debt collectors use the reporting mechanism as a tool to
persuade consumers to pay, just like dunning letters and telephone
calls. Of course, if a dispute is received after a debt has been
reported to a consumer reporting agency, the debt collector is
obligated by Section 1692e(8) to inform the consumer reporting
agency of the dispute.
III. "Is it permissible under the FDCPA to cease
collection of a debt rather than respond to a written dispute
from a consumer received during the 30-day validation period?"
Yes. There is nothing in the FDCPA that requires a debt
collector to continue collecting a debt after a written dispute
is received. Further, there is nothing in the FDCPA that requires
a response to a written dispute if the debt collector chooses
to abandon its collection effort with respect to the debt at issue.
See Smith v. Transworld Systems, Inc., 953 F.2d 1025,
1032 (6th Cir. 1992).
IV. "Would the following action by a debt collector
constitute continued collection activity under § 1692g(b):
reporting a charged-off consumer debt to a consumer reporting
agency as disputed in accordance with § 1692e(8), when the
debt collector became aware of the dispute when the consumer sent
a written dispute to the debt collector during the 30-day validation
period, and no verification of the debt has been provided by the
debt collector?" Yes. As stated in our answer to
Question II, we view reporting to a consumer reporting agency
as a collection activity prohibited by § 1692g(b) after a
written dispute is received and no verification has been provided. Again,
however, a debt collector must report a dispute received after
a debt has been reported under § 1692e(8).
I hope this is responsive to your request.
Sincerely,
John F. LeFevre
Attorney
Enclosure
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