Texas Debt Collection Practices Act Prohibits Aggressive Debt-Collection Practices

By Amy S. York

 

I work all night, I work all day

To pay the bills I have to pay

Ain’t it sad

And still there never seems to be

A single penny left for me

Abba – 1976

 

Americans have debt:  more than 60% of homes are mortgaged,[1] 44% of adults have car loans,[2] and 41% of American households carry an average of $9,333 in credit card debt.[3]  Add food, medicine, utilities, and other monthly bills, and our dollars are stretched pretty far on any given day.

I practiced bankruptcy for several years and found that many, if not most, bankruptcy cases result from one or more of the following “Big Three”:  job loss, major medical issues, and divorce.  It wasn’t that my clients didn’t want to pay their bills, they simply couldn’t.

Not everyone faces bankruptcy in their life, but many have faced unemployment at one time or another.  Job loss can happen to anyone and spiked due to the COVID-19 crisis.  Early estimates put the unemployment rate at over 10%.[4]

I can’t tell you how to budget for your family or which bills to pay if your dollars just don’t stretch far enough, but I can give you a little solace by letting you know that the Texas Debt Collection Practices Act[5] prohibits debt collectors from harassing and unconscionable behaviors and provides some recourse if they ignore these prohibitions.

Applicability of the Act

It is important to know to whom the Act applies in order to understand your rights.  It applies to consumer debt – debt from purchases for personal, family, or household purposes.[6]  It does not apply to business debt.

It applies to all debt collectors, but some provisions only apply to people collecting debts on behalf of others.[7]  For instance, a bank calling about a car loan it holds is a “debt collector” under the Act but a collection agency calling about a credit card debt is not only a “debt collector,” but also a “third party debt collector.”

Prohibited Acts

Threats and Coercion

Debt collectors cannot use threats or coercion, including:

• Threats of violence or other criminal acts;
• Falsely accusing a debtor of fraud or a crime or threatening to file criminal charges;
• Threatening that the debtor will be arrested or that the debtor’s property will be seized, repossessed, or sold without a proper court proceeding; or
• Threatening to take any other action prohibited by law.[8]

The debt collector can, however, tell the debtor that the debtor may be arrested after proper court proceedings if the debtor has violated a criminal law, threaten to institute civil proceedings to collect the debt, and seize, repossess, or sell property where the debt collector is contractually allowed to do so.[9]

Harassment and Abuse

A debt collector may not oppress, harass, or abuse a person.  It cannot:

• Use profanity or obscene language;
• Call someone without identifying itself and intending to annoy, harass, or threaten;
• Cause a person to incur fees for the call without first identifying itself; and
• Cause the telephone to ring repeatedly or continuously with the intent to harass.[10]

Unfair or Unconscionable Means

A debt collector cannot:

• Try to force a debtor to falsely claim that the debt was incurred for the “necessaries of life”;
• Try to collect interest or fees unless those fees are expressly authorized by the credit agreement or otherwise legally chargeable; or
• Try to collect a debt that the debt collector knows was incurred by an unauthorized person and is subject to a filed police report unless the debt collector has credible evidence that the police report was false.[11]

Fraudulent, Deceptive, or Misleading Statements

A debt collector cannot, for example:

• Misidentify itself or fail to provide its name, address, and telephone number on a communication;
• Falsely state that it has something of value for the debtor in order to get information about the debtor;
• Require the debtor to respond to an address other than the debt collector’s address;
• Misrepresent the “character, extent, or amount” of the debt or misrepresent the debt’s status in a court or governmental proceeding;
• Falsely claim to be bonded;
• Use misleading documents, seals, insignia, or designs that appear to come from a court, government authority, or law firm;
• Claim that the debt will be increased by fees that are not authorized by contract or statute or are within the court’s discretion; or
• Make any other misrepresentations in order to collect the debt or obtain information about the debtor.[12]

Additionally, a third-party debt collector must disclose in any communication that:

• The communication is being made by a debt collector; and
• The communication is an attempt to collect a debt and that any information obtained will be used for that purpose.[13]

Penalties for Violations by Debt Collectors

A debt collector who violates the Act is subject to criminal and civil penalties.  Each offense is a misdemeanor subject to a fine of up to $500 per violation.[14]  A debtor can sue the offending debt collector for an injunction or restraining order and for actual damages.[15]  If the debtor is successful, the debtor can also receive an award for attorney fees.[16]

A violation of the Act also violates the Texas Deceptive Trade Practices Act, which may provide additional relief.[17]

If you or a loved one have suffered a personal injury, contact Dobbs & Porter, PLLC, at 903-600-HURT (4878) for a free consultation.

[1] Hagan, Shelly, Bloomberg.com, Almost 40% of U.S. Homes Are ‘Free and Clear’ of a Mortgage, https://www.bloomberg.com/news/articles/2019-07-17/close-to-40-of-u-s-homes-are-free-and-clear-of-a-mortgage (last visited Apr. 3, 2020).

[2] Morgan, Kyle, Finder.com, Car Loan Statistics – How Much Debt Do Americans Take on to Get Behind the Wheel, https://www.finder.com/car-loan-statistics (last visited Apr. 3, 2020).

[3] Resendiz, Joe, Value Penguin by LendingTree, Average Credit Card Debt in America:  April 2020, https://www.valuepenguin.com/average-credit-card-debt (last visited Apr. 3, 2020).

[4] Cox, Jeff, CNBC, The Upcoming Job Losses Will Be Unlike Anything the US Has Ever Seen, https://www.cnbc.com/2020/03/20/the-upcoming-job-losses-will-be-unlike-anything-the-us-has-ever-seen.html (last visited Apr. 3, 2020).

[5] This Act is referred to as both the Texas Debt Collection Act and the Texas Debt Collection Practices Act.  It is found in Chapter 392 of the Texas Finance Code.

[6] Tex. Fin. Code § 392.001(2).

[7] Tex. Fin. Code § 392.001(6)-(7).

[8] Tex. Fin. Code § 392.301(a).

[9] Tex. Fin. Code § 392.301(b).

[10] Tex. Fin. Code § 392.302.

[11] Tex. Fin. Code § 392.303(a), (c).

[12] Tex. Fin. Code § 392.304(a).

[13] Tex. Fin. Code § 392.304(a)(5).

[14] Tex. Fin. Code § 392.402(b).

[15] Tex. Fin. Code § 392.403(a).

[16] Tex. Fin. Code § 392.403(b).

[17] Tex. Fin. Code § 392.404(a).