Feds propose new rules on debt collection from the deceased

FTC logoThe Federal Trade Commission wants to update the rules on how debts from the deceased are collected, after some states allowed other people besides spouses to pay creditors.

The amended policy statement is designed to clarify circumstances under which the FTC will take action under the Fair Debt Collection Practices Act (FDCPA) and the FTC Act against companies trying to collect debts from deceased consumers.

The proposed policy statement explains how the FTC will enforce federal law regarding:
  • Whom debt collectors are allowed to contact to discuss a decedent's debt.
  • How collectors can contact and identify the right party to discuss a decedent's debt.
  • How collectors should avoid giving relatives the misleading impression they are personally obligated to pay the debt from their own assets, rather than from the decedent's estate.

The FDCPA generally allows debt collectors to contact only the decedent's spouse, executor or administrator of the estate. Since the FDCPA was enacted in 1977, state probate laws have allowed others authorization to pay a decedent's debts from assets in the estate.

In the proposed enforcement policy statement issued today for public comment, the Commission wants to reconcile the FDCPA's requirements with state probate law developments.

Under the proposed policy statement, the FTC would not take law enforcement action alleging that a collector violated the FDCPA by communicating about the decedent's debts with the decedent's spouse, the executor or administrator of the decedent's estate, or anyone else authorized to pay the debts from assets in the estate.

In addition, the statement provides guidance about steps debt collectors must take to identify people with whom they may communicate without improperly revealing a decedent's debt to others.

The statement also emphasizes that when communicating with someone authorized to pay the debts from assets of the decedent's estate, collectors must avoid creating the misleading impression that the person is personally liable or could be required to pay using his own assets. Collectors may have to disclose that this is not the case.

Enforcement policy statements do not have the force or effect of law, but they may reflect the Commission's interpretation of a legal requirement.

The FTC recently extended the comment period on the proposed changes and is accepting public comments until December 1, 2011. Comments should include the reference "Deceased Debt Collection Policy Statement." Instructions for submitting comments are found in the Federal Register notice.
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