Social media playing a role in collection actions

May 24, 2013

Social media playing a role in collection actions

Article provided by Enterprise Counsel Group, A Law Corporation
Visit us at http://www.enterprisecounsel.com

It is an age old issue in any business; how to collect for services and goods rendered to customers who are unable or refuse to pay. Third-party collection agencies have tried any number of ways to collect on debts, and social media is the newest such tools these agencies have explored. Facebook and Twitter have become ubiquitous in today's society, and while many debtors may shun phone calls and emails from credit agencies, it may be more difficult for debtors to completely shy away from all social media.

Because of this, the U.S. Consumer Financial Protection Bureau and Federal Trade Commission are about to weigh new restrictions regarding the way credit agencies may attempt to collect from debtors through social media.

Debt collectors should therefore be wary of violating the Fair Debt Collection Practices Act and other federal regulations. The law regarding how debt collectors may use social media is not entirely clear, and few federal or state cases have shed light on the issue. However, there are some guidelines that creditors should be certain to follow. For example, posting on a debtor's Facebook "wall" that the debtor owes money to a third party is a violation of the FDCPA; however, a posting on a debtor's wall asking where that particular person is located may not violate the FDCPA. This also means that if a creditor has access to a debtor's Facebook or Twitter account, that creditor can use these social media tools to find information about that person; for example, if the debtor recently bought a new car the credit agency may renew efforts to collect on the debt.

New regulations possible in 2013

Consumers filed an astounding 180,000 complaints to the FTC regarding debt collection in 2011, making debt collection issues a priority for federal regulators. The 2010 Dodd-Frank Act greatly increased the Consumer Financial Protection Bureau's powers in this regard. Richard Cordray, the CFPB director, told Bloomberg News that "[w]e will be using both our supervision authority and our enforcement authority to oversee the market and go after bad actors who flout the law."

Credit agencies do still have a variety of means at their disposal to collect on debt. A creditor may call a debtor between the hours of 8 a.m. and 9 p.m., send letters to the debtor's home and monitor the whereabouts of a debtor through loan documents and social media. Creditors are also able to involve courts in collecting debts, including a court judgment for the repossession of property in some circumstances.

Collection actions

Collecting on a debt can be a frustrating and confusing area of the law. The last thing a business or credit agency should do is violate the extensive regulations involving debt collection and put that debt at risk. Businesses and credit agencies interested in collecting on a debt should contact an experienced business law attorney to discuss their legal options.