One industry that believes it has found a great use for social media is the debt collection industry. Many debt collectors find social networks extremely helpful for obtaining crucial information such as debtor’s home and work locations, lifestyle expenditures, lists of friends and family, determining whether a debtor has the financial wherewithal to make payments on a defaulted debt, and as a result, whether a debtor is worth the expense of suing in court. Debt collectors also find social networks useful in communicating with debtors in a manner that may be more effective than mail or telephone. Unfortunately for collectors, social networks have their drawbacks - drawbacks that can lead to legal action, regulatory criticism and reputational harm.
Nearly 35 years ago Congress passed the Fair Debt Collection Practices Act of 1977 (“FDCPA”) (15 U.S.C. §§ 1692-1692p). The FDCPA was passed by Congress in response to certain questionable and unethical tactics used by debt collectors. Prior to the passing of the FDCPA it was not uncommon to have debt collectors disclose to the friends and family of delinquent borrowers, the delinquent status of a loan. Other unethical tactics included making threatening, misleading and other statements to debtors with the intent of forcing repayment. The FDCPA was essentially enacted to protect consumers from the harassment, both verbal and psychological, that frequently accompanied collection efforts. While the FDCPA generally defines debt collectors as agents/contractors engaged to collect debts on behalf of others, this article assumes debt collectors to be agents/contractors as well as the owners of the debt such as banks, finance companies and investors because, while the federal FDCPA narrowly defines debt collectors, many state collection laws that mirror the federal FDCPA define debt collectors as anyone that collects a debt.
The FDCPA was passed by Congress seven years before Facebook founder Mark Zuckerberg was born. Twitter founder Jack Dorsey was one year old and MySpace co-founder Tom Anderson was seven years old when the FDCPA was put into place. As such, today’s social media explosion could not have been anticipated by the framers of the FDCPA. Many experts in the debt collection field believe that due to the FDCPA’s age the law requires a revision to specifically address social media. According to these experts, debt collectors are operating in a “no man’s land” - the equivalent of the Wild West. These experts believe that without social media-specific guidance, the debt collection industry is at risk of extensive litigation brought by private parties and class action plaintiffs’ attorneys.
The Federal Trade Commission (“FTC”), the federal agency with authority to enforce the FDCPA, has not indicated that it will revise the FDCPA any time soon. Instead, the FTC has stated that the consumer protections included in the FDCPA are sufficient to protect consumers and that the FDCPA addresses all forms of communications, including communications initiated through social networks and other social media. According the the FTC, the FDCPA includes sufficient guidance to prevent harassment of debtors and improper communication.
As such, the FTC disagrees with debt collection experts that are calling for an amendment to the FDCPA relative to social media. As demonstrated below, it appears that debt collector’s challenges relative to social media appear to be due to a lack of understanding of the FDCPA or blatant disregard for the Act.
In August 2010, Florida resident Melanie Beacham sued debt collection agency MarkOne Financial LLC after the debt collector used Facebook to allegedly harass the consumer who was delinquent on an auto loan. According to the lawsuit, in addition to aggressively using traditional collection methods, the debt collector also used Facebook’s messaging function to contact the delinquent borrower as well as to contact her relatives to ask that they have her contact the collection agency. According to the lawsuit, MarkOne Financial LLC used Facebook to intentionally harass the debtor in an “outrageous format.”
The debtor, who fell behind on her loan payment during a medical leave from her job, stated that she was shocked when she learned that the debt collectors used Facebook to track down her whereabouts and contact her family. The debtor claimed significant embarrassment related to the disclosure of her bad debt to her family.
In April 2011, while the lawsuit remained pending, W. Douglas Baird, the Judge hearing the complaint, ordered MarkOne Financial LLC to cease the use of social networks for the purpose of contacting the debtor and the debtor’s family and friends. The order, considered groundbreaking by many in the field of debt collection, shows how social media is increasingly becoming the basis for lawsuits. The challenge to debt collectors that use social networks is not so much federal and state collections laws do not address the use of social media. Instead, the challenge is one of compliance and training.
While social media is widely used, many users, including debt collectors, do not fully understand the functionality and impact of many social media features. As in the example above, debt collectors may locate a debtor on Facebook (or any other social network) and may make use of the “Send Message” function provided. This feature allows the sender to send a confidential message to the recipient similar to an email. As this feature requires little effort on the part of the debt collector, it is possible to abuse this feature by repeatedly sending messages to the debtor - an act that may violate § 1692d of the FDCPA, which defines harassment or abuse as “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” As such, in order to avoid a violation of § 1692d, debt collectors should observe their firm’s FDCPA policy relative to phone calls and treat social network messages as a similar communication when using the messaging feature on a social network.
In addition to sending messages to the debtor, it is possible for debt collectors to send messages to the friends and family members of the debtor that are part of the debtor’s social circle. This functionality allows debt collectors to contact third parties for assistance in obtaining information about the debtor, a permissible act according to § 1692b of the FDCPA. However, debt collectors using the messaging function to contact friends and family of the debtor must comply with the FDCPA. As such, any communication with friends and family through a social network requires the following of the debt collector:
(1) Identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
(2) Not state that such consumer owes any debt;
(3) Not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) Not communicate by post card. In the case of social media, this should also include not posting any messages on the “Wall” of the debtor or the debtor’s friends and family. A postcard has the effect of openly disclosing a debt. A “Wall” posting is a digital equivalent;
(5) Not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt. While a social network message is not physical mail, it is the equivalent of electronic mail. As such, the debt collector should ensure that any message fully complies with this requirement; and,
(6) After the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.
Debt collectors must ensure that their use of social media and social networks conforms to the spirit and intent of the FDCPA. Based upon the general language of the FDCPA, acts of noncompliance are generally the result of inadequate training or blatant disregard for the FDCPA - not shortcomings in the FDCPA language.