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Monday, January 20, 2020
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The FDCPA Exception

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The Fair Debt Collection Practices Act (FDPCA) does not regulate the direct collection activities of businesses, such as self storage facilities, to which the debt is owed. It regulates the activities of businesses, such as collection agencies, to whom a debt is referred for collections. However, there is one exception in the law that can result in a creditor being subject to the law’s regulations. Creditors may be liable for FDCPA violations when the creditor “in the process of collecting its own debts, uses any name other than his own which would indicate that a third person is collection or attempting to collect such debts.” A creditor may be liable when it sends a series of collection letters bearing the letterhead of a collection agency from who it purchased the letters but the collection agency is not actually involved in the collection efforts. 

Self storage operators typically use a series of late letter and lien notices under the facility’s name when attempting to collect unpaid rent before the lien sale. These activities would not be subject to the FDCPA regulation. The use of collection letters provided by a collection agency post-auction may be an option for some operators. The problem occurs when the self storage operator uses the identity of the debt collector rather than its own letterhead. If the operator concludes that using the name of a collection agency provides better results, the letter must strictly comply with the requirements of the FDCPA. The collection agency should provide written confirmation that the collection letters purchased are compliant with the FDCPA regulations before they are used. Alternatively, the facility operator can simply outsource the entire collection process to a collection agency. If the storage operator is not involved in sending the collection letters it is the collection agency and not the self storage operator that would be liable for failure to comply with the requirements of the FDCPA.

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California SSA's Erin King Will Represent National SSA

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