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Texas Unfair Debt Collections Act

©2014 Mark Courtois and Diane Davis

TEXAS LAW.  Unfair debt collection practices are prohibited under both Texas and federal law. In Texas prohibited unfair debt collection practices are set forth in four main sections of the Texas Finance Code. Debt collectors are prohibited from doing the following acts:

THREATS or COERCION. (Tex. Fin. Code Ann. § 392.301 (a)). A debt collector may not use threats, coercion, or attempts to coerce that employ any of the following practices:

1) Using or threatening to use violence or other criminal means to cause harm to a person or property of a person;

2) accusing falsely or threatening to accuse falsely a person of fraud or any other crime;

3) representing or threatening to represent to any person other than the consumer that a consumer is wilfully refusing to pay a non-disputed consumer debt when the debt is in dispute and the consumer has notified in writing the debt collector of the dispute;

4) threatening to sell or assign to another the obligation of the consumer and falsely representing that the result of the sale or assignment would be that the consumer would lose a defense to the consumer debt or would be subject to illegal collection attempts;

5) threatening that the debtor will be arrested for nonpayment of a consumer debt without proper court proceedings;

6) threatening to file a charge, complaint, or criminal action against a debtor when the debtor has not violated a criminal law;

7) threatening that nonpayment of a consumer debt will result in the seizure, repossession, or sale of the person's property without proper court proceedings; or

8) threatening to take an action prohibited by law.

 

HARASSMENT or ABUSE. (Tex. Fin. Code Ann. § 392.302). A debt collector may not oppress, harass, or abuse a person by:

1) using profane or obscene language or language intended to abuse unreasonably the hearer or reader;

2) placing telephone calls without disclosing the name of the individual making the call and with the intent to annoy, harass, or threaten a person at the called number;

3) causing a person to incur a long distance telephone toll, telegram fee, or other charge by a medium of communication without first disclosing the name of the person making the communication; or

4) causing a telephone to ring repeatedly or continuously, or making repeated or continuous telephone calls, with the intent to harass a person at the called number.

 

UNFAIR or UNCONSCIONABLE MEANS. (Tex. Fin. Code Ann. § 392.303). A debt collector may not use unfair or unconscionable means that employ the following practices:

1) seeking or obtaining a written statement or acknowledgment in any form that specifies that a consumer's obligation is one incurred for necessaries of life if the obligation was not incurred for those necessaries;

2) collecting or attempting to collect interest or a charge, fee, or expense incidental to the obligation unless the interest or incidental charge, fee, or expense is expressly authorized by the agreement creating the obligation or legally chargeable to the consumer; or

3) collecting or attempting to collect an obligation under a check, draft, debit payment, or credit card payment, if: a) the check or draft was dishonored or the debit payment or credit card payment was refused because the check or draft was not drawn or the payment was not made by a person authorized to use the applicable account; b) the debt collector has received written notice from a person authorized to use the account that the check, draft, or payment was unauthorized; and c) the person authorized to use the account has filed a report concerning the unauthorized check, draft, or payment with a law enforcement agency, as defined by Article 59.01, Code of Criminal Procedure, and has provided the debt collector with a copy of the report. 

 

FRAUDULENT, DECEPTIVE, OR MISLEADING REPRESENTATIONS. (Tex. Fin. Code Ann. § 392.304). A debt collector may not use a fraudulent, deceptive, or misleading representation that employs the following practices:

1) using a name other than the: A) true business or professional name or the true personal or legal name of the debt collector while engaged in debt collection; or B) name appearing on the face of the credit card while engaged in the collection of a credit card debt;

2) failing to maintain a list of all business or professional names known to be used or formerly used by persons collecting consumer debts or attempting to collect consumer debts for the debt collector;

3) representing falsely that the debt collector has information or something of value for the consumer in order to solicit or discover information about the consumer;

4) failing to disclose clearly in any communication with the debtor the name of the person to whom the debt has been assigned or is owed when making a demand for money (not applicable to a person servicing or collecting real property first lien mortgage loans or credit card debts);

5) in the case of a third-party debt collector, failing to disclose, except in a formal pleading made in connection with a legal action: A) that the communication is an attempt to collect a debt and that any information obtained will be used for that purpose, if the communication is the initial written or oral communication between the third-party debt collector and the debtor; or B) that the communication is from a debt collector, if the communication is a subsequent written or oral communication between the third-party debt collector and the debtor;

6) using a written communication that fails to indicate clearly the name of the debt collector and the debt collector's street address or post office box and telephone number if the written notice refers to a delinquent consumer debt (but the debt collector is not required to disclose the names and addresses of employees of the debt collector);

7) using a written communication that demands a response to a place other than the debt collector's or creditor's street address or post office box (this does not require a response to the address of an employee of a debt collector);

8) misrepresenting the character, extent, or amount of a consumer debt, or misrepresenting the consumer debt's status in a judicial or governmental proceeding;

9) representing falsely that a debt collector is vouched for, bonded by, or affiliated with, or is an instrumentality, agent, or official of, this state or an agency of federal, state, or local government;

10) using, distributing, or selling a written communication that simulates or is represented falsely to be a document authorized, issued, or approved by a court, an official, a governmental agency, or any other governmental authority or that creates a false impression about the communication's source, authorization, or approval;

11) using a seal, insignia, or design that simulates that of a governmental agency;

12) representing that a consumer debt may be increased by the addition of attorney's fees, investigation fees, service fees, or other charges if a written contract or statute does not authorize the additional fees or charges; 13) representing that a consumer debt will definitely be increased by the addition of attorney's fees, investigation fees, service fees, or other charges if the award of the fees or charges is subject to judicial discretion;

14) representing falsely the status or nature of the services rendered by the debt collector or the debt collector's business;

15) using a written communication that violates the United States postal laws and regulations;

16) using a communication that purports to be from an attorney or law firm if it is not;

17) representing that a consumer debt is being collected by an attorney if it is not;

18) representing that a consumer debt is being collected by an independent, bona fide organization engaged in the business of collecting past due accounts when the debt is being collected by a subterfuge organization under the control and direction of the person who is owed the debt (this does not a creditor from owning and operating a bona fide debt collection agency); or

19) using any other false representation or deceptive means to collect a debt or obtain information concerning a consumer.

 

The Texas statute does not prevent a debt collector from: 1) informing a debtor that the debtor may be arrested after proper court proceedings if the debtor has violated a criminal law of this state; 2) threatening to institute civil lawsuits or other judicial proceedings to collect a consumer debt; or 3) exercising or threatening to exercise a statutory or contractual right of seizure, repossession, or sale that does not require court proceedings. Tex. Fin. Code Ann. § 392.301 (b). A creditor may also charge a reasonable reinstatement fee as consideration for renewal of a real property loan or contract of sale, after default, if the additional fee is included in a written contract executed at the time of renewal. Tex. Fin. Code Ann. § 392.303 (b). A debt collector can also collect or attempt to collect an obligation under a check, draft, debit payment, or credit card payment if the debt collector has credible evidence, including a document, video recording, or witness statement, that the report filed with a law enforcement agency, as required by this law, is fraudulent and that the check, draft, or payment was authorized. Tex. Fin. Code Ann. § 392.303 (c). 

Criminal and Civil Penalties. For a period of one year from the date of violation, violators of this statute can be charged with a misdemeanor punishable by a fine of not less than $100 or more than $500 for each violation. Tex. Fin. Code Ann. § 392.402. On the civil side, if filed within a year of the violation, any person may maintain a cause of action for violations of the Act, including actions for injunctive relief and actual damages. Tex. Gov. Code Ann. § 392.403(a). A person is entitled to maintain a cause of action under the Act regardless of whether it was his personal debt in issue, because the Act provides for remedies for "any person" adversely affected by prohibited conduct, not just parties to the consumer transaction. See Monroe v. Frank, 936 S.W.2d 654, 660-661 (Tex. App.--Dallas 1996, writ dism'd w.o.j.). Actual damages may include mental anguish. Brown v. Oaklawn Bank, 718 S.W.2d 678, 680 (Tex. 1986) (holding that damages for "serious upset" and "strain of overall situation" were recoverable under the Act). A successful plaintiff is entitled to recover attorney's fees reasonably related to the amount of work performed and costs. Tex. Fin. Code Ann. § 392.403(b). Violations of some specific provisions may also allow the plaintiff to recover $100 for each violation. Tex. Fin. Code Ann. § 392.403(e). A violation of this Act is also actionable as a deceptive trade practice prohibited under the Texas Deceptive Trade Practices Act. Tex. Fin. Code Ann. § 392.404(a). 

But note that a person does not violate the Texas Unfair Debt Collections Act if the action complained of resulted from a bona fide error that occurred notwithstanding the use of reasonable procedures adopted to avoid the error. Tex. Fin. Code Ann. § 392.401.

 FEDERAL LAW. There is a federal statute that prohibits the same kind of conduct, and has similar remedies for violations of the act. More information regarding the federal Fair Debt Collection Practices Act can be found at:  http://www.consumer.ftc.gov/articles/0149-debt-collection