Federal Trade Commission Issues Policy Statement on Collecting Debts of the Deceased
On July 20, 2011, the Federal Trade Commission (“FTC”) issued a Final Statement of Policy Regarding Communications in Connection with the Collection of Decedents’ Debts (“Final Policy Statement”), expanding the communications collectors may have to identify the person who has “the authority to pay the decedent’s outstanding bills from the decedent’s estate.” This Final Policy Statement recognizes that state probate laws have changed since the enactment of the Fair Debt Collection Practices Act (“FDCPA”) in 1977, and in many instances there is no person formally empowered to satisfy the debts of a deceased person.
The Final Policy Statement specifies that the FTC will not take law enforcement action under the FDCPAif a debt collector communicates about a deceased person’s debts with that deceased person’s spouse, the executor or administrator of the deceased person’s estate, or anyone else who is authorized to pay the debts from the assets of the estate.
Collectors are now permitted to communicate with these groups of persons to identify the appropriate person with authority to satisfy debts of the deceased, as well as to follow up with “clarifying questions” until the person with whom the collector is speaking has, to the collector’s satisfaction, identified the executor, administrator, or individual with authority to pay the decedent’s outstanding bills from the decedent’s estate. Also, the Final Policy Statement:
- Describes how debt collectors may communicate with family members and others to locate someone who is authorized to pay the deceased person’s debts from the estate, and specifies that collectors may not mislead individuals into believing that they have the authority to pay the decedent’s debts when they do not;
- Specifies that, in seeking to locate someone who is authorized to pay the deceased person’s debts from the estate, collectors may not reveal or refer to the debts, but may say they wish to discuss payment of the deceased person’s bills;
- States that in keeping with the FDCPA’s prohibition on unfair, deceptive, or abusive collection practices, debt collectors may not contact family members and others at unusual or inconvenient times or places; and
- Emphasizes that, in communicating with someone who is authorized to pay the debts from assets of the deceased person’s estate, collectors must avoid creating the misleading impression that the individual is personally liable or could be required to pay using his or her own assets, or assets held jointly with the deceased person.
The Final Policy Statement also makes clear that: (1) when contacting family members, the collector must state that it is looking for the person responsible for paying outstanding bills of the decedent “from the decedent’s estate;” (2) until the debt collector establishes it is talking to the person with authority to pay the decedent’s debts, it cannot reveal that the decedent owes a debt; and (3) once the person with authority to pay the bills from the estate is reached, that person must be given the required disclosures under the FDCPA (e.g., notice of the right to proof of the decedent’s debt and to contest the debt).
The Final Policy Statement becomes effective on August 29, 2011 and is available here. The Concurrence Statement of Commissioner Julie Brill can be found here.
Troutman Sanders is an accomplished and experienced leader in providing litigation and regulatory advice to a broad spectrum of financial services institutions. Additionally, Troutman Sanders’ Financial Services Litigation Group has successfully litigated a wide variety of individual and class action litigation involving the FDCPA and other federal and state consumer protection laws.
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