Fair Debt Collection Act

Mercy Maranga
July 16, 2009 — 1,358 views  
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A fair debt collection act protects the rights of both the creditor and the debtor. A debt collection act prohibits collection agencies from abusive practices. Debt collection refers to pursuing payments on debts owed by individuals or businesses. The debt collector can either be an individual or a collection agency. A collection agency operates as an agent of the creditor. The collection agencies collect the debts at a percentage of the total money owed.

A debt collection agency acts on behalf of the creditor. Countries that have collection agencies have laws that govern them. The laws prohibit the agencies from any abusive practices. Some of the collection agencies are subsidiaries of the companies that own the original debt and therefore they are referred to as 'first party agencies'. They are part of the first party to the contract, that is, the creditors. The second party in this case refers to the debtor. Third party agencies are normally not part of the original contract.

In the United States for example, thirty party collection agencies are subject to the Fair Debt Collection Practices Act of 1977. This is a fair debt collection act in that it prohibits communication of a debt to a third party. It also limits the hours during which an agency can call a debtor. The act also prohibits false and deceptive representations. Agencies are also prohibited from making any threats of action against a debtor.

The United Kingdom has no act on debt collection but for any third party agency to operate, it must have a consumer credit license as per the Consumer Credit Act of 1974. Also, for a third party collection agency to retain its license, it must work within the framework of fair debt collection guidance that was outlined i

About the Author

Mercy Maranga writes content on Finance and Debt Management. Visit her site here for more information on Finance and how to effectively Manage your debts. Debt

Mercy Maranga